Home > Income Tax > Help Center > Agriculture Income Last Updated: Feb 21st 2023
The contribution of agriculture in the Indian economy is increasing over the time. Agriculture is the primary sector of the Indian economy and most of the rural population is dependant on agriculture.
Many taxpayers who earn a salary today also make a living through agriculture. Understanding agriculture's income and taxability is crucial since it affects so many people.
This document covers
The definition of agriculture income as per Income Tax Act is very wide. Agriculture income not only includes the income of the cultivators but also the land holders who are receiving rent. Agriculture income can be in the following ways.
Agriculture Income is exempted from Income Tax u/s 10(1) of Income Tax act. Central Government has no power to levy tax on agriculture income
For comprehensive understanding on capital gains when selling agricultural land, learn more at @ When to consider agriculture land as a capital asset?
The following are some of the examples of Agriculture income.
The following are some of the examples of non-Agriculture income.
5.1 What it means?: Even though the agriculture income is exempted from tax, a method has been laid down to impose taxes on agriculture income in indirect way. This concept is known as partial integration of agricultural income with non-agricultural income.
5.2 Applicability: This is applicable to individuals, HUF, AOP’s, BOI’s and Artificial Judicial persons.
5.3 Objective: The objective of partial integration is to tax the non-agriculture income at higher rates
5.4 Conditions: The following 2 conditions needs to be satisfied to apply the concept of partial integration
Mr Rama aged 40 years is a resident of India and he has a salary income of Rs 10 lakhs per annum. He also has agriculture income of Rs 3 lakhs, and he has spent Rs 50,000 towards expenses for agriculture land.
Answer: Generally people think that agriculture income is tax free but when you have taxable income, there is taxes on agriculture income also
Non-Agriculture Income – Rs 10,00,000
Net Agriculture income(4,00,000 – 50,000) = Rs 3,50,000
Total Income – 10,00,000 + 3,50,000 = 13,50,000
Income Tax Under Old Regime = Rs. 2,17,500
Net Agriculture income (4,00,000 – 50,000) = Rs 3,50,000
Basic Exemption limit = Rs 2,50,000
Total Income - 3,50,000 + 2,50,000 = Rs 6,00,000
Income tax under Old Regime = 32500
217500 – 32500 = Rs 185000
Tax payable is 185000
Education cess @ 4% = 7400
Total tax is 192400
If agriculture income is not taxable, then Mr Rama needs to pay tax only on Rs 10 lakhs i.e, 117000 but as the partial integration is available, he is paying a tax of Rs 192400
It is not mandatory to file agriculture income if you have only agriculture income. But it is good practice to file Income tax return as it helps in establishing financial identity over the years.
If your net agriculture income is more than Rs 5,00,000, the following details needs to be reported.
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