Lecture 6
Income from Agriculture
Agriculture
• According to Section 40(3) of the Income Tax Act, 2023, Agriculture includes any
kind of horticulture, animal husbandry, natural use of land, poultry & fish farming,
reptile farming, nursery, any kind of cultivation in land & water, production of egg
& milk, production of timber, grass, plant, fruit, flower, honey, and seeds.
Scope and Classification
• Agricultural Income can be classified into following three categories:
• Regular Agricultural Income: Any income derived from any agriculturally based
activities of an assesse. Some of the examples are: sale of crops, sale of fish from
fisheries farm etc.
• Partly Agricultural Income: According to section 40(2) of the ITA, 2023, income
derived from the sale of tea and rubber grown and manufactured by the seller shall
be computed as follows:
• 40% of such income was derived from business, and
• 60% of such income was derived from agriculture
Special Agricultural Income:
• Following two types of Income shall be considered as agricultural income as per
section 41 of ITA, 2023
• Income derived from the Sale of Asset exclusively used for agricultural purpose
• Insurance claim/ salvage compensation money received against demolished asset
exclusively used for agricultural purpose:
Characteristics of Agricultural Income
• It must be derived from any agricultural activities in Bangladesh
• The land for agricultural income to be assessed must be situated in Bangladesh.
• It must come from fundamental agricultural work like field cultivation or
cultivation of the ground (tilting of the land, sowing of the seeds).
• Marketing of the agricultural products should be through ordinary procedure. The
produce raised may have no market in its native form and may require to perform
a process on the produce to make it marketable or saleable.
• Income may come from gain on sale or discarded value of machineries or plant
used for agricultural purpose.
• Some may partially be the agricultural income; e.g. sale of tea, rubber, etc.
• When the property is occupied by the cultivator or the recipient of agricultural
income where any process as may be described agricultural, is carried therein, or
in the immediate vicinity of agricultural land, and is used as a dwelling house, in
connection with the land, any income fro such house property is regarded as
agricultural income.
• No advance tax is payable on agricultural income up to Tk. 800,000
Some Typical Agricultural Income
Following sources are also considered as income under the head ‘Income from
agriculture’ in addition to above mentioned sources. These include income from:
• Cattle rearing
• Sale of palm juice and Date juice, seeds and grass, if grown by human effort
• Agricultural cooperative society organized for farming and cattle rearing
• Land/assets used to process agricultural commodities to make them marketable
• The land leased for agricultural purposes
• Any crop sharing system generally known as adhi, barga or bhag
• Sale of herbal or medicinal plants
Some Non-agricultural Income
• Income from ferry ghat, mooring terminal and fishing
• Income from sale of produce that grow up in the agricultural land without
agricultural works e.g., forest trees, wild grass, fruit, and flowers grown
spontaneously and without human effort
• Income from salt production by flooding the land with sea water and then
extracting salt thereon
• Income from cutting and selling of timber on contract
• Income on arear of rent for agricultural land
• Income from letting on vacant land not used for agricultural purpose
• Royalty/ground rent against lease of land
• Sale of soil used for brick field
• Income from sale of water used for irrigation
• Income from sale of forest trees, flowers, bamboo, wild grass, reeds, or fruits produced
naturally without any agricultural work
• Sale of stone from quarries;
• Income from salary for working as an agricultural supervisor/manager;
• Income from sale of crops which has been purchased from others for resale;
• Income from dairy firm established separately for business purpose
• Income from fisheries; fish hunting, ship anchor etc.
• Income derived from butter and cheese making;
• Income received as commission for working as middleman in agro products;
• Remuneration received as commission for working as middleman in agro
products;
• Interest received by an assesse against loan in the form of agricultural produce;
• Dividend paid by a company out of its agricultural income
Admissible Expenses
• As per section 42 of the ITA, 2023, in computing the taxable income under the head
‘Agricultural Income’, some expenses are allowed to be deducted from the revenues
under this head. Those allowable allowances and deductions are:
• Land Development Tax: Any land development tax, tax or rate/cess paid in respect of the
land used for agricultural purposes [section 42(1)(a)].
• Rent and maintenance expense: Any rent, charges for development & maintenance paid
in respect of the land used for agricultural purposes, and cost of cultivation [Sction
42(1)(b)].\
• Interest on loan: Interest/profit payable on any loan for agricultural purpose.
• Repair, maintenance, transportation costs: Any amount paid for maintaining agricultural
implements and machinery in good condition, its repair and for providing upkeep of cattle
for the purpose of cultivation, processing or transportation [Section 42(1)(d)]
• Insurance premium paid: to affect any insurance against loss of, or damage to,
the land/any crop to be raised from, or cattle to be reared on, the land [Section
42(1)(e)]
• Expenses for preventive measures: Any sum paid for the protection of
agricultural affairs from natural calamity or any other damages [section 42(1)(f)]
• Depreciation and Amortization: Depreciation expenses relating to all the tangible
assets and facilities and amortization expenses relating to intangible assets from
which agricultural income is derived is considered as allowable deduction [section
42(1)(f)]
• Loss on sale/disability of cattle: In case of the death or permanent disability of the
cattle, excess of the original cost of the cattle and the sale proceeds of the cattle or
its meat. [section 42(1)(g)
• Foreign travel expense: incurred as a member of any government sponsored
agriculture related delegation team, not capital in nature [section 42(1)(h)]
• Training expense incurred for training Bangladeshi citizens in any Board
approved scheme. [section 42(1) (i)]
• Any agriculture related scientific research expenditure or any expenditure solely
and exclusively incurred for the development of the agricultural activities of the
assesse [section 42(1) (j)]
Books of Accounts not maintained properly (section 43)
If it is found that –
• The assesse has not been maintaining proper books of accounts;
• Where it is apparent to the DCT that the assesse has been following accounting
method that failed to provide clear information regarding the assessee’s income;
• The assessee failed to preserve the books of accounts or transaction details; or
• The preserved books of accounts or transaction details is not verifiable.
Under such circumstances, notwithstanding anything contained in any other section,
production costs will not be the amount claimed by the assessee rather it will be
60% of the market value of the product
Adhi, Barga or Bhag
• According to section section 43(2), no deduction as cost of production shall be
admissible under this clause if the agricultural income is derived by the land
owner from the share of the produce raised through crop sharing system, e.g.,
adhi, barga or bhag.
• Similarly, no deduction shall be allowed, if tax has not been paid or deducted in
accordance with the provisions of part 7 of the ITA, 2023.
Market Value
