Agricultural income sec 2[]

Agricultural income means;

1. Any rent or revenue derived from land which is situated in India, and is used for agricultural
purposes.
2. The direct income from agriculture is treated as agricultural income.
3. An indirect income from agriculture is not agricultural income.

E.g., Dividend from a company engaged in agricultural activities, salary of a farm manager etc.

4. Capital gain arising from the transfer of agricultural land shall not be (agricultural land in
urban area is a capital asset) treated as agricultural income –> capital gain
5. If a person purchases a standing crop and after cutting it, sells it and marks profit-> it is not
an agricultural income.

Income from farm house is treated as agricultural income, if the following conditions are satisfied:

1. If the building is owned and occupied by the cultivator

2. It is situated in the immediate vicmity of the agricultural land
3. Income from saplings or seedings, groom in a nursery shall be deemed to be agricultural
income.

Partly agricultural income

Particulars Agricultural income Business income

Tea (growing &

1. manufacturing) 60% 40%

2. Centrifuged latex cenex 65% 35%

3. Coffee (grown and cured) 75% 25%

Coffee (grown, roasted with

4 or without mixing chicory 60% 40%

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Sugar manufacturing

A company produce sugar from cane grown on their own farm are treated as partly
agricultural income

i) Here the agricultural income is the average market price of the cane used ii)

Balance is business income Non – agricultural income

1. Income from market- other sources

2. Income from stone quarries
3. Income from mining- royalties
4. Income from land used for storing agricultural produce
5. Income from supply of water for irrigation purpose
6. Income from self-grown gran, trees, bamboos
7. Income from fisheries
8. Income from sale of earth for brick marketing
9. Remuneration received as manger in an agricultural firm
10. Dividend from a company engaged in agriculture
11. income of the buyer of ripe crops
12. income from dairy farm, poultry farm, animal husbandry etc.
13. income from interest on arrears of rent of agricultural land.

integration of agricultural income

 agricultural income is totally exempt from tax. however agricultural

income is a factor in determining the tax as the non- agricultural
income is an individual, HUf, AOP or BOI whose, total income
[excluding agricultural income] exceeds the minimum taxable limit Rs
2,50,000[ nominal- individual] 30,000[ seniors’ citizen 60- 80 years]
and Rs 500,000[ super senior above 80 yrs.] and the agricultural
income exceeds Rs 5000.

total income xxxx

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 add: agricultural income xxx

aggregate income xxxx  compute

taxability on this income (A)

 basic exemption limit (2.5,3or 5) xxx add agricultural income

xxx
(B) xxxx
compute the tax on this amount (B)
tax payable = [ A-B] xxx
add: education cess 2 sec xx

less: Rebate u/s 87 A

(If his total income does not exceed
Rs. 500,000/-)
Rs 5000 or tax payable whichever is
less note: 2017-18 onwards 5000
before 2000

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