how much agricultural income is exempt from tax


Is agricultural income exempt from income tax? Income from agriculture is exempt if the net agricultural income is less than Rs.5000 or if the total income apart from agricultural income is less than the exemption slab limit on agricultural income.


How to become agricultural exempt?

 · If the income of the assessee falls in the 2 conditions then agriculture income is exempt : 1. Net agriculture income is less than 5000 2. Total income, excluding agriculture income, is less than the basic exemption limit.

How to qualify for farm tax exemption?

The primary purpose of exempt agricultural and horticultural organizations under Internal Revenue Code section 501 (c) (5) must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Their net earnings may not inure to the benefit of any member.

What does AG exempt mean?

Agricultural income is not taxable under Section 10 (1) of the Income Tax Act as it is not counted as a part of an individual’s total income. However, the state government can levy tax on agricultural income if the amount exceeds Rs.5,000 per year. Agricultural income in India is categorised as a valid source of income and basically includes income from sources that …

What is an AG exemption?

 · State governments are well within their rights to levy a tax on agricultural income, even though the government at the center cannot tax the income directly. According to the latest amendment, the State Government is allowed to levy tax on products and services above the exemption rate, which is Rs 5,000 per fiscal year.


What is agricultural income?

Agricultural income means the revenue derived or income earned from sources including farming/Agriculture land, building on/identified with agricultural land, and the commercial product obtained from horticultural land.

How is agriculture income treated for tax purposes?

You may have heard that agricultural income has an exemption from taxation. Well, not quite!

Do you know agriculture income is exempt under which section?

We will tell you everything you wanted to know about income tax agricultural income.

Treatment for tax purpose

As mentioned in Section 10 (1) of the Income Tax Act of 1961, agricultural income is exempted from taxation.

What is agricultural income in India?

What is an agricultural income in India? As per Section 2 (1A) of the Income Tax Act, agricultural income can be defined as follows: (a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes. (b) Any income derived from such land by agriculture operations including processing …

What is section 54B?

Section 54B gives relief of capital gains to a taxpayer who sells his agricultural land and from the sale proceeds acquires another agricultural land. The conditions for claiming the benefit u/s 54B are: Assessee should be an individual or HUF;

What is income in agriculture?

Income should be earned from produce which is got by cultivating the land. Income can be from a land which is only used for agricultural purposes. Income can be earned from a land which is not under the ownership of assessee’s.

Is agriculture a major occupation in India?

Since we have records available, agriculture is known to be the primary occupation of a major part of the population of India. For its food requirement, the country is dependent on the crop produce. All governments have periodically launched schemes and amended existing ones, to ensure there is substantial growth in this main sector …

What is section 54B?

Under Section 54B, the tax payer gets relief if he sells his land which is agricultural in nature and buys another agricultural land from the amount received. The following conditions have to be met for this purpose: The assessee has to be a HUF or an individual.

What is an agricultural organization?

Agricultural organizations may be quasi-public and are often designed to encourage better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet expenses of upkeep and operation.

What is a 501c3 exemption?

In addition, an organization may qualify for exemption under section 501 (c) (3) if its primary purpose is educating the public on horticultural or agricultural subjects. Additional information: Examples of agricultural and horticultural purposes. Return to Life Cycle of an Agricultural or Horticultural Organization.

Is agricultural income taxable?

Agricultural income is not taxable under Section 10 (1) of the Income Tax Act as it is not counted as a part of an individual’s total income. However, the state government can levy tax on agricultural income if the amount exceeds Rs.5,000 per year.

What is agricultural income in India?

Agricultural income in India is categorised as a valid source of income and basically includes income from sources that comprise agricultural land, buildings on or related to an agricultural land and commercial produce from an agricultural land.

What is agricultural land?

The agricultural land or the land where the building is located, is being assessed for land revenue or subject to a local rate assessed. Revenue from sale of processed produce of agricultural nature without actual agricultural activity. Key points to remember while considering if an income is actually a valid agricultural income –.

Agricultural Income tax: definition and Meaning

Agricultural income in India means a combination of income and revenue obtained from sources such as land, buildings built on land, or associated with agriculture, or products produced from horticulture. This gives the agricultural income meaning.

Rent or Revenue generated from agricultural Land

It is clearly said in the Agricultural Income tax Act of 1961 that any rentals or revenues accruing from the agricultural land parcel in the country and used for any purposes of agriculture, will not pay any rental/revenue based taxes although some conditions will have to be fulfilled.

Income derived from agricultural land

Profit generated from agricultural operations conducted on such land, including processing of agricultural products raised or received as rent-in-kind, or by the cultivation of crops so that they can be marketable, or by selling them. And the amount of tax on agricultural land will be based on this.

Income from farm building required for agricultural operations

If the assessed income derives from the building he or she owns and occupies or from his or her land, the income is exempt from tax: In order for the building to be constructed on the land, it must be within walking distance.

Things that determine an income as agricultural income

The following points have to be considered when determining whether an income is an agricultural income

Some notes related to Agricultural income

Rate calculation for Individuals, HUFs, AOPs, BOIs, and Artificial Judicial Persons takes into consideration agricultural income and the casual income from income tax.

Agricultural income exemptions

Generally, processed foods sold to consumers are not considered agricultural income if they don’t involve any agricultural or processing activities.

What is agricultural income?

Meaning of the term ‘ Agricultural Income ’. Section 10 (1) simply states that any agricultural income earned by the person is exempted from income tax. Now, in order to understand the full coverage of exemption provided to agricultural income under section 10 (1) of the Income Tax Act, it is important to under the definition / coverage …

What is section 10 of the Income Tax Act?

Section 10 of the Income Tax Act covers the incomes which do not form part of the total income of any person. In other words, the incomes listed under section 10 are exempted from payment of income tax. As per section 10 (1), any agricultural income earned by the person during any previous year is exempted from tax. Under the present article, we would understand the provisions of section 10 (1) of the Income Tax Act. The article covers the definition of the term ‘Agricultural Income’ and treatment of agricultural income’.

What is condition 2?

Condition No. 2 – The total income (excluding the Agricultural Income) is more than the basic exemption limit. If the above conditions are satisfied, the income tax would be calculated in the following manner –. 1. Calculate income tax on total income (including agricultural income) as per prevailing income tax rates.

What is EFI in farming?

Gains or losses from the sale or other disposition of farm property. Gains or losses from the sale or other disposition of farm property other than land can be designated as EFI if you (or your partnership or S corporation) used the property regularly for a substantial period in a farming business.

What is a farm business?

You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards and groves.

When is property put in service?

Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Even if you are not using the property, it is in service when it is ready and available for its specific use. Example.

When do you claim depreciation?

You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. The placed-in-service date for your property is the date the property is ready and available for a specific use.

Is a mutual ditch considered real property?

For purposes of real property, stock in a mutual ditch, reservoir, or irrigation company is treated as real property if both of the following conditions are met at the time of the trade.

What is livestock used for?

Livestock used in farm business. If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. The purpose for which an animal is held ordinarily is determined by a farmer’s actual use of the animal.

What is a 1231 gain?

Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Table 9-1.

What Is Agricultural Income?

  • The meaning of agricultural incomeis different in the Income-tax Act which comprises of the following three: 1. Any revenue or rent received from any agricultural land in India. This does not pertain to the income earned from the selling of agricultural land. 2. Any income earned from agricultural land from the following activities: 1. Agriculture; both basic and subsequent activitie…

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The Exclusions

  • The following are the exclusions to the agricultural income: 1. Revenue earned from produce that is extremely processed 2. Revenue earned from selling agricultural produce without any agricultural activity 3. Revenue earned from selling trees as timber

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Important Points

  • Only the following income is considered as valid agricultural income: 1. Income is earned from a piece of land that already exists 2. Income should be earned from produce which is got by cultivating the land 3. Income can be from land which is only used for agricultural purposes 4. Income can be earned from land which is not under the ownership of assessee’s

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Agriculture Income Is Exempt Under Section 10(1) of The Income-Tax Act.

  • Step 1:
    Compute Income-tax liability on total income including agricultural income.
  • Step 2:
    Compute tax rebate on agricultural Income. Tax rebate on agricultural income is Income-tax computed on a total of agricultural Income + basic exempt slab limit

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