What is agricultural income?
Agricultural income means the revenue derived or income earned from sources including farming/Agriculture land, building on/identified with agricultural land, and therefore the commercial product obtained from horticultural land.
Section 2 (1A) of the Tax Act of 1961 defines agricultural income as –
- Any rent or revenue that makes from any piece of land in India that’s for agriculture.
- Further, any income earned from such land via agricultural operations like processing of agricultural products to render it saleable and market-ready.
- Any income earned from saplings or seedlings grown in a very nursery.
- Additionally, any income thanks to a farmhouse provided it satisfies laid down conditions in Section 2 (1A)
How is agriculture income treated for tax purposes?
It’s possible you’ve heard that agricultural income is tax-free. Well, not quite!
Do you know which agriculture income is exempt under which section?
We are going to tell you everything you wanted to grasp about revenue enhancement agricultural income.
As mentioned in Section 10 (1) of the revenue enhancement Act of 1961, agricultural income under taxation is exempted from taxation. However, agriculture income is included for calculating the overall liabilities if the conditions mentioned below are satisfied cumulatively-
- Net agricultural income exceeds Rs. 5,000/- for the previous fiscal year.
- Total income, in additionally to the web agricultural income, exceeds the fundamental exemption limit (Please Note – the essential limit of agricultural income exempt from tax is 2,50,000 for people below 60 years old and Rs. 3,00,000 for people above 60 years of age)
For people who satisfy the above-mentioned conditions, the agriculture tax liability is going to be computed within the following steps-
Step 1: By adding the agricultural income to the entire income/
Step 2: By adding exempt income under section 10 to the agricultural income. Step 3: Additionally, subtract the quantity obtained from Step 2 from that of Step 1 to derive the ultimate liabilities.
Benefit u/s 54 B
The taxpayer (individual or HUF) can claim benefit under this section if he sells his agricultural land to shop for another agricultural land. However, he must fulfil certain conditions to avail of this benefit.
What Are The samples of Agricultural Income?
Here are some samples of agricultural income:
- Income earned from the sale of replanted trees
- Further, the rental payment received from agricultural land
- Revenue received from the sale of seeds
- Income from growing creepers/ flowers
- Additionally, profits are generated by a partner from a firm or company engaged in agricultural production or activities.
- As a result, by investing funds in agricultural operations, a partner earns interest from a firm or company.
Most Commonly Asked Questions
1. What is the agricultural income exemption limit?
The baseline exemption level for agricultural income is Rs. 2,50,000 for those under the age of 60 and Rs. 3,00,000 for those beyond the age of 60.
2. Why does agricultural income not have to be taxed?
Agriculture has long been the primary source of income for the majority of Indians. Further, the complete country remains heavily keen on crop production to satisfy its food requirement. this can be still the first sector that drives the economic process in this country. Therefore, it’s only pertinent that the govt. should devise schemes, measures, and policies to confirm the continual growth of the agriculture sector. Therefore, in one such scheme, agricultural income has an exemption from taxation.
3. What’s agricultural income and the way is it treated for tax purposes?
Section 2 (1A) of the Tax Act of 1961 defines agricultural income as –
- Firstly, any rent or revenue that generates from any piece of land in India that’s for agriculture
- Further, any income earned from such land via agricultural operations like processing of agricultural products to render it saleable and market-ready
- Moreover, any income earned from saplings or seedlings grown in an exceeding nursery
- Any income thanks to a farmhouse provided it satisfies laid down conditions in Section 2 (1A)
Treatment for tax purposes
As mentioned in Section 10 (1) of the tax Act of 1961, agricultural income is exempted from taxation. However, agricultural income is included in calculating the whole liabilities if the conditions mentioned below are satisfied cumulatively- Net agricultural income exceeds Rs. 5,000/- for the previous twelvemonth Total income, in addition to the web agricultural income, exceeds the essential exemption limit.
