Taxation Exam > Taxation Notes > Fast Track Quick Revision Income Tax > Agricultural Income (Section 2(1A) & 10(1))
Agricultural Income (Section 2(1A) & 10(1))
| Section 10(1). Agricultural Income is exempt from tax |
| Agricultural income as defined under section 2(1A) is fully exempt from tax but with a rider. Since agricultural income is exempt from tax it doesn’t form part of total income. Also Constitution of India gives exclusive powers to the State Legislature to make laws with respect to taxes on agricultural income. (Entry No. 46 of State List) |
| Section 2(1A). Meaning of Agricultural Income | |||||||
| (a) | (b) | (c) | |||||
| Rent from agricultural land situated in India used for agricultural purpose | Growing of crops from land situated in India. Also saplings in a nursery | Rent from building situated in the immediate vicinity of agricultural land situated in India and used for agricultural purpose and not situated in urban area. Exception : If let out for purpose other than agriculture then NAI | |||||
| Basic operation | Yes | Yes | No | ||||
| Subsequent operation | Yes | No | Yes | ||||
| Whether AI? | Yes | Yes | No | ||||
| 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 | xxx | Sale of crops | xxx | GAV | xxx | ||
| Less : taxes on land | xxx | Less : all business expenses | xxx | Less : MT | xxx | ||
| Less : Collection charges | xxx | • Salary | NAV | xxx | |||
| • Irrigation expenses | Less : SD | xxx | |||||
| OSAI | xxx | • Depreciation | Less : Interest | xxx | |||
| BIAI | xxx | HPAI | xxx | ||||
| Computation of income which is partly agricultural & partly non agricultural | |||
| AI | NAI | ||
| Rule 7A | Manufacture of rubber. | 65% | 35% |
| Rule 7B(1) | Sale of coffee grown and cured by seller. | 75% | 25% |
| Rule 7B(1A) | Sale of coffee grown, cured, roasted and grounded by seller in India with or without mixing chicory or other flavouring ingredients. | 60% | 40% |
| Rule 8 | Growing and manufacturing tea in India. | 60% | 40% |
| Computation of tax if assessee is earning both AI & NAI (Partial Integration) | ||||||||
| 1. | The assessee is an individual or HUF or BOI, or AOP or artificial juridical person | Computation of tax | ||||||
| 2. | Non-agricultural income i.e normal income exceeds basic exemption. |
| ||||||
| 3. | Agricultural income exceeds Rs.5,000. | |||||||
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FAQs on Agricultural Income (Section 2(1A) & 10(1))
| 1. What is agricultural income under Section 2(1A) of the Taxation Act? |  |
Ans. Agricultural income under Section 2(1A) of the Taxation Act refers to the income generated from agricultural activities such as farming, cultivation of crops, livestock rearing, dairy farming, poultry farming, and any other agricultural practice. It includes income from the sale of agricultural produce, rent received from agricultural land, and income derived from agricultural operations.
| 2. How is agricultural income taxed under Section 10(1) of the Taxation Act? | |
Ans. Agricultural income is exempt from tax under Section 10(1) of the Taxation Act. This means that farmers and individuals engaged in agricultural activities do not have to pay income tax on the income they earn from agricultural sources. This exemption is provided to support and encourage agricultural practices and ensure the welfare of farmers.
| 3. Can agricultural income be taxed if it exceeds a certain threshold? | |
Ans. No, agricultural income is not taxed even if it exceeds a certain threshold. Section 10(1) of the Taxation Act provides a complete exemption from income tax to agricultural income, regardless of the amount. This exemption is applicable to all individuals engaged in agricultural activities, including farmers, cultivators, and other entities involved in agricultural practices.
| 4. Are there any exceptions to the tax exemption on agricultural income? | |
Ans. Yes, there are certain exceptions to the tax exemption on agricultural income. The exemption does not apply to income derived from non-agricultural sources, such as income from farmhouse rentals, income from the sale of agricultural land, income from agricultural processing activities, and income from agricultural products not grown on the land. These types of income may be subject to taxation as per the relevant tax laws.
| 5. Do I need to report my agricultural income while filing my tax return? | |
Ans. While agricultural income is exempt from income tax, it is still necessary to report it while filing your tax return. The income from agricultural sources should be disclosed in the appropriate section of the tax return form, even though it is not taxable. This allows the tax authorities to track the income and ensure compliance with the tax laws. It is important to accurately report all sources of income, including agricultural income, to avoid any penalties or legal consequences.
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