Bullet Revision - Agriculture Income SATC 4.
1
provides that agricultural income from land situated in India is exempt.
CONCEPT OF TAXATION OF THE AGRICULTURE INCOME
Agriculture Income is totally exempt under the Act, but shall be included in the total income in case
of certain assessee for the purpose of determining the rate of tax on the non-agriculture income
known as partial integration of taxes. It is applicable to Individuals, HUF, AOP, BOI and Artificial Judicial
Persons.
Two conditions which need to satisfied for partial integration are:
Net Agricultural Income should exceed ` 5,000 p.a.
AND
Non-Agricultural Income should exceed the maximum amount not chargeable to tax.
Tax calculation in such cases is as follows:
Step 1: Add non-agricultural income with net agricultural income. Compute tax on the aggregate
amount.
Step 2: Add net agricultural income and the maximum exemption limit available to the assessee (i.e.
` 2,50,000 / ` 3,00,000 / ` 500,000). Compute tax on the aggregate amount.
Step 3: Deduct the amount of income tax calculated in step 2 from the income tax calculated in
step 1 i.e. Step 1 – Step 2.
Step 4: The sum so arrived at shall be increased by health & education cess @4% after taking Rebate
u/s 87A
if applicable.
[Note: In case TOTAL INCOME excluding LTCG/STCG(111A)/Casual Income does not exceeds the
maximum exemption limit, partial integration of tax will not be applicable.
DEFINITION OF AGRICULTURAL INCOME [Section 2(1A)]
Agricultural income may arise in any one of the following three ways:-
(1) It may be Rent or Revenue derived from land situated in India and used for agricultural purposes.
(2) It may be income derived from such land
a. through agriculture or
b. through the performance of a process ordinarily employed by a cultivator or receiver of
rent in kind to render the produce fit to be taken to the market or
c. through the sale of such agricultural produce in the market.
(3) It may be derived from any farm building required for agricultural operations
The income derived from saplings or seedlings grown in a nursery would be deemed to be agricultural
income, whether or not the basic operations were carried out on land.
SURAJ AGRAWAL TAX CLASS | NEW DELHI |8527230445
Bullet Revision - Agriculture Income SATC 4.2
INCOME FROM COMPOSITE ACTIVITY OF AGRICULTURE AND BUSINESS
Amount of Non-agricultural
Nature of Income Agricultural Income Income i.e. business
income
1. Income from sale of TEA Grown and Manufactured 60% 40%
by the assessee in India
2. Income from RUBBER plants Grown by the seller 65% 35%
in India
3. Income derived from the sale of COFFEE Grown 75% 25%
and Cured by the seller in India
4. Income derived from the sale of COFFEE Grown, 60% 40%
Cured, Roasted and Grounded by the seller in
India
Rule 7 - Agricultural produce other than Tea, rubber etc used as Raw Material in a Manufacturing
Concern
FMV of any agricultural produce shall be deducted in computing PGBP income & not the
cost of cultivation.
[Must refer sugarcane
SURAJ AGRAWAL TAX CLASS | NEW DELHI |8527230445
