Unit 1 Agricultural Income
Unit 1 Agricultural Income
Unit 1 Agricultural Income
Income
Prepared By:
Ms. Mandeep Kaur
Its definition is wide and
inclusive. It tells us which
incomes are agricultural
Agricultural Income incomes. It covers the
income of cultivators and
The Income-tax Act, 1961 does not define
what agricultural income is. land-owners both.
2
Section 10 (1)
Agricultural Income is
fully exempted as per
Income Tax Act 1961,
u/s 10(1)
What is Agriculture Income?
Section 2(1A)
Agricultural income includes the following:
Any rent or revenue derived from land;
Any income derived from such land by
agriculture or from processing of agricultural
produce;
Any income from farm building.
Subject to Three Conditions
These three types of agricultural income shall be treated as ‘Agricultural
income’ only when following conditions are satisfied:
Income From Land
Land Situated in India
Land used for Agricultural Purpose :
Basic Operations : It involves cultivation of the ground like tilling of land,
sowing of seeds, planting etc. and involves expenditure of human labour.
Subsequent Operations: It involves subsequent operation for efficient
production of the crop such as weeding, digging the soil around the growth,
prevention of crop from insects, removal of undesirable growth etc.
The above three types of Agricultural incomes have
been defined u/s 2(1A)(a) ,2(1A)(b) and 2(1A)(c)
The definition of ‘agricultural income’ under section 2(1A) provides
that the following shall constitute agricultural income:
(i) any rent or revenue derived from land which is situated in India
and is used for agricultural purposes [Section 2(1A)(a)]
(ii) any income derived from such land by agricultural operation
including processing and sale of the agricultural produce as rent-in-
kind so as to render it fit for the market [Section 2(1A)(b)],
(iii) income derived from building or land used for agricultural
operation, in certain cases. [Section 2(1A)(c)]
(i) any rent or revenue derived from land which is situated in India and
is used for agricultural purposes [Section 2(1A)(a)]
• Rent • Revenue
Rent should be the payment in ‘Any revenue’ means:
Cash or Rent or
Kind or Income which falls under section 2(1A) (b)
Money or (c)
Money’s worth.
• By one person to another
• In respect of a grant of a right to use land.
EXAMPLE: share of agricultural produce If the immediate and effective source is not
received by a landlord is though in kind but it land , the income cannot be considered to be
is rent and thus agricultural income. agricultural income
Following are not Agricultural Income (Not derived from land)
Contd.,
Coffee grown, cured, roasted and grounded by the seller in India with 7B(1A) 60% 40%
or without mixing chicory or other flavouring ingredients
Tax on Non-Agricultural Income if
assessee earns agricultural income also
• Integration is done only for – individual/ HUF /BOI.
• It is not done for Firm, Company/ Co-operative Society/ Local Authority.
It is done only when:
1.Net Agricultural income exceeds INR 5,000/- for P.Y. 2019-20, and
2. Total income, excluding net Agricultural income, exceeds INR 2,50,000/-.
Note that the aforementioned condition at Serial No.2 shall change to INR
3,00,000/- in case if the Assessee is an individual who falls in the age
bracket of 60 to 79 Years during the P.Y. 2019-20, and to INR 5,00,000/- in
case if the Assessee is an individual who is of the age of 80 Years or more
during the P.Y. 2019-20.
Contd.,
Step 1: Add Agricultural income and Non-agricultural income and
calculate tax on aggregate.
Step 2: Add agricultural income to the maximum exemption limit and
calculate tax.
Step 3: Tax Payable= Tax in Step 1- Tax in Step2
Step 4: Claim rebate under section 87A if applicable.
Step 5: Add Surcharge , if applicable+ health & Education Cess @4%
Question
A, resident in India, aged 60 years, earned
agricultural income of Rs.5,00,000 during previous
year 2019-2020. Compute his tax liability
assuming that he has non-agricultural income of :
a. Rs.2,70,000
b.Rs.3,00,000
c. Rs.3,80,000.
Solution
(a) and (b) – Since non-agricultural income does not exceed maximum
exemption limit of Rs. 3,00,000 (being individual of the age of 60 years
or more) there will be no partial integration and tax payable on non-
agricultural income will be NIL. Further , agricultural income is exempt.
Therefore, total tax payable is NIL.
(C) Step 1: Agricultural Income + Non- Agricultural Income
= Rs.5,00,000 +Rs.3,80,000 = Rs. 8,80,000
Tax on Rs. 8,80,000 :
First Rs.3,00,000 = NIL
Next Rs.2,00,000 (5%) = 10,000
Balance Rs.3,80,000 (20%) =76,000
Total Tax = Rs.10,000+Rs.76,000 = Rs.86,000
Step 2: Agricultural Income +Maximum Exemption limit
= Rs.5,00,000 + Rs.3,00,000 = Rs. 8,00,000
Solution Contd.,
Tax on Rs. 8,00,000 :
First Rs.3,00,000 = NIL
Next Rs.2,00,000 (5%) = Rs.10,000
Balance Rs.3,00,000 (20%) =Rs.60,000
Total Tax = Rs.10,000+ Rs.60,000 = Rs.70,000
Step 3: Tax under Step1 – Tax under Step 2 (Rs. 86,000 – Rs.16,000
Rs.70,000)
Less: Rebate u/s 87A (as total income does not exceed Rs. Rs.12,500
5,00,000)
Rs.3,500
Less: Rebate u/s 87A (as total income exceed Rs. 5,00,000) NIL
Rs.1,05,000