Agricultural income exempt from tax.
Definition of Agricultural income
Rule 7, 7A, 8
Special manner of computation of agricultural income for TCR.
It is performed generally on land. (e.g. tilling of land, sowing of seed, watering the land, planting and manuring etc.); and
It is performed on crops. e.g. weeding, pruning, cutting, harvesting and rendering the produce fit for market);
Only basic operation
Both basic and subsequent operation
Only Subsequent operation
Non Agricultural Income
The building is on or in the immediate vicinity of agricultural land.
It is occupied by the cultivator or receiver of rent or revenue.
It is used as a dwelling house or as a store-house or other out-house.
The land is assessed to land revenue or it is situated in rural area.
Population (as per latest census)
Distance (Straight distance as crows flies)
more than 10,000 and upto 1,00,000
from the local limits of any
more than 1,00,000 and upto 10,00,000
municipality or cantonment
Make only 1 P & L account then divide net profit into 2 parts.
Non- Agricultural Income
Manufacture of rubber.
Sale of coffee grown and cured by seller.
Sale of coffee grown, cured, roasted and grounded by seller in India with or without mixing chicory or other flavouring ingredients.
Growing and manufacturing tea in India.
P1: 100% of income from growing and selling tea in India is treated as agricultural income. (True or False)
P2: 100% of income from manufacturing and selling tea in India is treated as Non-agricultural income. (True or False)
Ans: (1) True, and all its agricultural income shall be exempt from tax. (2) True and all its non- agricultural income shall be taxable.
Partial Integration of Agricultural Income With Non-Agricultural Income
Addition of agricultural income to non agricultural income for computation of tax is known as partial integration. Please do note that it is only for tax purpose that agricultural income is added to normal income. Agricultural income shall never form part of total income.
1. The assessee is an Individual or HUF or BOI, or AOP or artificial juridical person. (The integration is not applicable to firm and company); and
2. Non-agricultural income i.e normal income exceeds basic exemption; and
3. Agricultural Income exceeds Rs 5,000.
Computation of Tax
Tax on (Non-agricultural income + Agricultural income) at slab rate
Less : Tax on (Agricultural income + basic exemption limit) at slab rate
P1: Explain whether in following cases partial integration shall be done or not.
1. Mr. X’s Business Income Rs 1,50,000. Agricultural Income Rs 5,00,000.
2. Mr. X’s Business Income Rs 8,00,000. Agricultural Income Rs 5,000.
3. X Ltd. Business income Rs 50 crores. Agricultural income Rs 20 crores.
4. Mr. X’s Business Income Rs 6,00,000. Agricultural Income Rs 25,00,000.
Ans: No; No; No; Yes and tax shall be Rs 1,08,150.
P2 : Compute tax . Business Income Rs 9,00,000; LTCG Rs 3,00,000. STCG STT 50,000, Lottery income Rs 40,000. Deduction u/s 80G 1,00,000, Agricultural Income Rs 1,50,000.
Gross Total Income
Deduction u/s 80G
Dividing the total income
Computation of Tax
LTCG @ 20% of 3,00,000
STCG STT @ 15% of 50,000
Lottery @ 30% of 40,000
Tax on Normal Income + Agricultural Income = 9,50,000 [20% of 9,50,000 - 75,000] 1,15,000
Less: tax on AI + BE [1,50,000 + 2,50,000] [10% of 4,00,000 - 25,000] (15.000)
+ Education cess @ 3%
P3: Compute tax of Mr. X LTCG Rs 6,00,000. Agricultural Income Rs 3,00,000. ans: 72,100.
P4: Mr. X earns income from growing and manufacturing tea in India Rs 12,00,000. Compute Tax. ans: 62,830
COMPUTATION OF AGRICULTURAL INCOME UNDER DIFFERENT HEADS
computation u/h other sources
computation u/h Business
computation u/h house Property
s 56 to 59
^s 28 to 44D
s 22 to 27
Rent from land
Sale of crops
Less : taxes on land
Less : all business expenses
Less : MT
Less : Collection charges
• Irrigation expenses
Less : SD
Less : Interest
P5: Rent from the building used for agricultural purpose situated in the immediate vicinity of agricultural land Rs 10,00,000. Municipal tax paid Rs 1,00,000. Other Income Rs 4,00,000. Compute Tax. ans: 28,840.
P6: From the following information, compute total income & agricultural income : M98