Agriculture income is exempt under the Indian Income Tax Act. So the income earned from agricultural operations in India is not taxed. While calculating Income tax on non agricultural income of an assessee agricultural income of the same assessee is also taken into consideration.
Under IT Act 1961, Income to be classified as Agricultural Income, the following two conditions should be fulfilled –
(a) The Income should be derived from land situated in India, and
(b) The Land should be used for agricultural purposes.
Agricultural income may arise in any one of the following three ways:-
1) It may be rent/revenue derived from land situated in India and used for agricultural purposes.
2) It may be income derived from such land
3) It may be derived from any farm building required for agricultural operations.
CERTAIN INCOME WHICH IS TREATED AS AGRICULTURE INCOME
• Income from sale of replanted trees.
• Rent received for agricultural land.
• Income from growing flowers and creepers.
• Share of profit of a partner from a firm engaged in agricultural operations.
• Interest on capital received by a partner from a firm engaged in agricultural operations.
• Income derived from sale of seeds.
CERTAIN INCOME WHICH IS ARE TREATED AS AGRICULTURAL INCOME
• Income from poultry farming.
• Income from bee hiving.
• Income from sale of spontaneously grown trees.
• Income from dairy farming.
• Purchase of standing crop.
• Dividend paid by a company out of its agriculture income.
• Income of salt produced by flooding the land with sea water.
• Royalty income from mines.
• Income from butter and cheese making.
• Receipts from TV serial shooting in farm house is not agriculture income
INCOME WHICH IS PARTIALLY AGRICULTURAL AND PARTIALLY FROM BUSINESS
Income From Growing And Manufacturing Any Of Product Other Than Tea Rule 7
In case assessee has composite income which is partially agricultural and partially non agricultural it must be disintegrated and for computing business income the market value of agricultural produce raised by assessee and utilized as raw material should be deducted.
Income From Growing And Manufacturing RUBBER Rule 7A
Income derived from sale of centrifuged latex or brown crepes or specified blocks of rubber obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business and 35% of such income shall be deemed the income liable to tax.
Income From Growing And Manufacturing COFFEE Rule 7B
• Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business and 25% of such income shall be income liable to tax.
• Income derived from sale of coffee grown, cured, roasted and grounded by the seller in India with or without mixing flavoring ingredients shall be computed as it were income derived from business and 40% of such income shall be deemed to be income liable to tax.
Income From Growing And Manufacturing TEA Rule 8
Where assess has a business of growing tea leaves and then processing the procedure adopted to disintegrate is as under
(1). Compute the income of growing as well as manufacturing tea under head PGBP after claiming deduction available there under
(2). 60% of income such computed will be treated a agricultural income and 40% treated as business income
These online MCQ Mock tests and MCQ questions includes all main concepts of the chapter (Agricultural Income) in CS Executive Module I Tax Laws & Practice (MCQ based OMR) Exam