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Agricultural income, is defined under section 2(1A) of Income Tax Act as a valid
source of income. It comprises income from agricultural land and commercial
products produced from it. Till date taxes on agricultural income is exempted
The income which comes under agricultural income is:
➢ Any rent or revenue derived from land which is situated in India and is used for
agricultural purpose
➢ Incomes derived from commercial sale of produce gain from an agricultural
land.
➢ Income earned by selling sapling or seeds grown in nursery.
➢ Income generated from renting or leasing any building in or around agricultural
land, subject to the following conditions.
A) The building should be occupied by cultivator or farmer either through rent or
revenue.
B) The building should be used as residential place, storeroom or outhouse.
C) The land is either assessed to land revenue in India or is subject to local rate
assessed and collected by the officers of government.
D) If the land is situated within the jurisdiction of municipality and cantonment
board with a population of more than 10 thousand as per the latest census in which
sale of land took place.
A few exclusions to this income will be :
A) Revenue from sale of processed produce of agricultural nature without an
actual agricultural activity.
B) Revenue from extremely produce process.
C) Revenue from trees that have been sold as timber.
D) Income earned by poultry farming.
E) Income earned by producing salt by flooding land with sea water.
There should be no confusion between the terms ‘Rent’ and ‘Revenue’. rent
means income generated on monthly basis in return for any land or building. But
revenue is a mode of payment that is generated from sale of goods or assets of
movable or immovable property.
Agricultural income is not taxable in India if this is the only source of income to
any person, so if a person earns agricultural income as the only source of income
will not be required to file their income tax return. But if the person is earning
besides agricultural income like salary, rent, business income etc. then that person
is liable for filing his returns.
Why agricultural income is exempted to taxation?
For some people this hard to digest that agricultural income is exempted to
taxation, the question arises WHY?
Is it because our government have any kind of sympathy towards farmers
community? However this is completely untrue.
If any kind of income is made completely tax free it clearly means that farmers are
not the real beneficiary to the tax. Agricultural income has became a source of
money laundering.
(Money laundering is a process by which money earned by crime or corruption is
converted into legitimate assets) politicians purchases agricultural land at very
nominal rate INE20,000 per acre in central areas of the country. And during the
agricultural seasons (harif and rabi) they allow farmers to grow the crops on their
land. Sugar cane and cotton agre grown in Kharif season. While groundnuts are
grown in rabi season. And because of illiteracy and lack of awareness they don’t
maintain the detailed records and this is in turn misused by farmers and business.
As they give the opportunity to pass off unaccounted cash income as agricultural
income.
And further these politicians sell the agricultural land on high rates which was
purchased by them at very law cost and sell of agricultural land is not considered
as capital asset, hence no tax is imposed on sale of agricultural land and huge
profits are earned by the politicians.
Section 10(1) of income tax act 1961.
Section 10(1) of income tax act 1961 deals with tax on agricultural income. All
agricultural income are not exempted under the income tax act. Under this act only
state government can impose the tax on agricultural income, central government
excludes this income from the purview of central income tax.
But this no tax on agricultural income policy is accountable only if the agricultural
income of a person is less then 5000. if the agricultural revenue is more then the
minimum limits then the individual will be accountable to pay taxes as per the
applicable tax or tax deducted at source rates.
According to finance act, the total tax liability of an individual will include
agricultural income added to the non agricultural portion. And if the income earned
is only the agricultural income then it is not required to file income tax return and
any agricultural losses can be sat off against agricultural profits in next 8 years.
Tax calculation with agricultural income
Following conditions should be satisfied:
➢ Income from agriculture should be more than 5000
➢ Total income from the financial income,, excluding agricultural income should
exceed INR 2,50,000.

this limit will increase to 3,00,000 in case of individual
who is above the age of 60 and below 80, and will be 5,00,000 for individual
who is above 80.


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