How much agricultural income is tax free


Following sample chart can enable taxpayers to draw a better conclusion:

S.No. Case I II III
a] Regular Taxable Income 300000 400000 900000
b] Agricultural Income 100000 500000 100000
c] Applicable basic exemption limit 250000 250000 250000
d] Total of (b) + (c) 350000 750000 350000

May 23 2022


Is agricultural income tax free in India?

Agricultural income earned by a taxpayer in India is exempt under Section 10 (1) of the Income Tax Act,1961. What is more shocking and surprising is that this so-called agricultural income is tax-free without any limit. You can have an unlimited amount of agricultural income without paying even a single rupee towards income tax.

Do you have to pay tax on agricultural income?

Therefore, even though agricultural income is exempt, you’ll have to pay some tax on agricultural income. 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:

What is the maximum amount of agricultural income exempt from tax?

Total income, in addition to the net agricultural income, exceeds the basic exemption limit (Please Note – The basic limit of agricultural income exempt from tax is 2,50,000 for individuals below 60 years of age and Rs. 3,00,000 for individuals above 60 years of age)

How much of my gross income can I deduct for farming?

The total is then subject to the 25% of gross income from farming limit in that year. . To ensure your deduction is within the deduction limits, keep records to show the following.


Is agriculture income tax free in India?

As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Agricultural income is defined under section 2(1A) of the Income-tax Act.

Is agricultural income fully exempted?

Is agricultural income wholly exempt from income tax? Agricultural income is wholly exempt from tax provided that the individual’s i) total agricultural income is less than Rs. 5,000 and ii) the total income, excluding agricultural income, is less than basic exemption limit.

Why agricultural income is tax free in India without any limit?

One of the propositions is that India has now become a self-sufficient agricultural economy which has seen tremendous growth in production as well as the living standards of those involved in the sector. The exemption on Agricultural income has been provided under Sec 10(1) of the Income-tax Act, 1961.

Does farmers have to pay tax in India?

Under section 10(1) of the Income Tax Act, 1961, agricultural income is exempted from tax. Any proceeds from rent, revenue or transfer of agricultural land and incomes from farming are considered as agricultural income under the law.

Why is agricultural income not taxed?

The reason for its exemption was that agriculture was already subject to a major tax in the form of land revenue. The Indian Taxation enquiry committee made a concerted attempt in 1925 to bring agricultural tax into the framework of income tax.

How much income is tax free in India?

○ The exemption limit of income tax is up to ₹2.5 lakh for all Individuals, HUF below 60 years and NRIs for FY 2018-19. ○ An additional 4% health and education cess is applicable on the tax amount.

Is it mandatory to file ITR for agriculture income?

Agricultural income in ITR 1 is to be shown under the column of Agriculture Income. But ITR 1 can only be used if the agricultural income is up to Rs 5,000. In case the said income exceeds this limit form ITR-2 is required to be filed.

How is agricultural income tax calculated?

Example – Let us say that an Individual Assessee has a Total income of INR 7,50,000/- (excluding Agricultural income) and a Net Agricultural income of INR 100,000/-. Then, per this step, Tax shall be computed on INR 7,50,000/- + INR 1,00,000/- = INR 8,50,000/-.

Which income is exempted from income tax?

Income Exempt From Tax As Per Section 10Section 10(1)Income earned through agricultural meansSection 10(13)Any payment received through a Superannuation FundSection 10(13A)House Rent AllowanceSection 10(14)Allowances utilised to meet business expensesSection 10(15)Income received in the form of interest85 more rows

Is agricultural land taxable?

As Rural Agricultural Land does not constitute a Capital Asset, therefore Capital Gains Tax is not levied on the sale of Rural Agricultural Land. This will apply irrespective of the value of the transaction and the capital gains tax on sale of agricultural land will not be levied in any case.

Is agriculture exempt from GST?

Agriculture is outside the gamut of tax framework in India for both direct and indirect tax. Tax experts said that seeds are exempt under the GST law and the agricultural produce from seeds or services in relation to agricultural produce are also exempt from GST.

Are farmers exempt from GST?

Farmers typically do not collect tax on their sales, but they still pay the GST/HST on their taxable purchases. In recognition of potential cash flow problems, certain agricultural equipment is specifically identified as being zero-rated.

Are farmers exempted from income tax?

Currently, farmers in India are exempted from paying income tax to the government.

Is agricultural income fully exempt from tax?

Under Section 10(1) of the Income Tax Act, 1961, any income generated from any agricultural activities are exempted from being taxed by the Governm…

How much agricultural income is tax free in India?

If a farmer’s income is less than Rs.5,000 or if the total income minus the agricultural income is less than the basic exemption limit which is Rs….

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 partial income?

Ans. partial agriculture income is the income where assessee is growing agriculture produce and use them as raw material for manufacturing of products. Here income from the sale of product is partial agriculture income and partial non agriculture income.

Is agricultural land a long term capital asset?

Asset transferred should be agricultural land, whether a long-term capital asset or short-term capital asset. (It is important to know here that rural agricultural land or agriculture land in rural area is not a capital asset, and hence, exempt from capital gains)

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 –.

What is revenue generated in India?

Revenue generated through rent or lease of a land in India that is used for agricultural purposes. Revenue generated through the commercial sale of produce gained from an agricultural land. Revenue generated through the renting or leasing of buildings in and around the agricultural land subject to the following conditions.

Where should income be from?

Income should be from an existent piece of land. Income should be from a piece of land that is used for agricultural operations. Income should stem from produce achieved after cultivation of the land. Income can be from a land that is not under the assessee’s ownership.

Can the Central Government levy agricultural tax?

The Central Government can’t impose or levy tax on agricultural income. The exemption clause is mentioned under Section 10 (1) of the Income Tax Act of India. However, state governments can charge agricultural tax. As of the latest amendment, income from agriculture, if within INR 5000 in a financial year, will not be accounted for tax purposes.

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?

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. Section 2 (1A) of the Income Tax Act of 1961 defines agricultural income as –. Any rent or revenue that creates from any piece …

Is agriculture a primary occupation?

From time immemorial, agriculture has been the primary occupation for a majority of the Indian population. Further, the entire country is still heavily dependent on crop production to meet its food requirement. This is still the primary sector that drives economic growth in this country. Therefore, it is only pertinent that the Government should devise schemes, measures, and policies to ensure the continuous growth of the agriculture sector. Therefore, in one such scheme, agricultural income has an exemption from income tax.

Is agriculture income tax exempt?

As mentioned in Section 10 (1) of the Income Tax Act of 1961, agricultural income under income tax is exempted from taxation. However, agriculture income is included for calculating …

Can you get a tax break for farming?

If you can prove that you farm as a business and not just for recreation, you can get both property tax breaks and income tax breaks. But you don’t have to be a full-time farmer to take advantage of agricultural tax breaks that will help you with your property taxes. In some cases, all you need is a piece of land that’s not currently being used.

Can you get a tax break for grazing a cow?

Grazing a single cow on your property can be enough to trigger series tax breaks in some places. If you qualify, an agricultural tax exemption could knock thousands off your property tax bill. Depending on your state’s rules, one way to execute this tax strategy is to offer use of your land to a local farmer.

Do you have to do the work yourself to get a farm tax exemption?

You don’t necessarily have to do the work yourself to claim the exemption for your property. You may, however, have to renew your application for a farm assessment each year, depending on your local tax assessor’s rules and on state requirements.

Can you get property tax breaks if you are a farmer?

Agricultural Taxes: The Basics. If you’re a farmer, you’re no doubt familiar with the complicated tax landscape for farmers in this country and you may even use a tax accountant to help you get as many tax breaks as you’re eligible for. If you can prove that you farm as a business and not just for recreation, you can get both property tax breaks …

Can you claim an agricultural exemption?

Claiming an agricultural exemption when you’re not a full-time farmer isn’t something you want to do without careful attention to the rules. For example, if you sell an agricultural product grown on your property (jam, honey, vegetables, eggs from chickens, flowers), you might need the okay of your local health department. Depending on zoning rules or homeowners association rules you might not be able to plant a vegetable garden or sell items from your residential property at all, even with a business permit.

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 does it mean when farmers are not subject to income tax?

Had it been the intention of the government to provide relief to farmers by not subjecting them to income tax, it could have been done by fixing a threshold for tax-free agricultural income. If some type of income is made completely tax free without any limit, it clearly means that the farmers are not the real beneficiaries …

Is agricultural income tax free in India?

What is more shocking and surprising is that this so-called agricultural income is tax-free without any limit. You can have an unlimited amount of agricultural income without paying even a single rupee towards income tax.

Can you have agricultural income without paying income tax?

You can have an unlimited amount of agricultural income without paying even a single rupee towards income tax. While income tax is levied on all types of incomes from all the persons, why the government is not imposing any income tax on agricultural income, is a million-dollar question. Some people are under the wrong impression …

Is agricultural income used to convert black money into white money?

Agricultural income is being used as a tool to convert black money into white money for the last 70 years. Most of the politicians and the persons patronised by these politicians are misusing the “agricultural income” route for conversion of their black money into white money. Income Tax Department and the officers sitting in …

How Is Agricultural Income Taxed?

There is no clause for directly taxing agricultural income. According to Section 10 (1) of the Income Tax Act, agricultural income is not considered a means of income. Income generated from agriculture is exempted from taxation by the Central Government. However, there is an indirect method of taxing that is levied on agricultural income.

Calculating Tax On Agricultural Revenue

Take the sum of the agricultural income and non-agricultural income. The tax (A) should be computed on this amount.

Exceptions to the calculation

In the case of agricultural land not meeting the criteria of the section, the person needs to conduct a separate tax evaluation. Also, if the revenue is below Rs 5,000, then ITR1 has to be filed.

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.

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 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.

Can you deduct highway tax?

Highway use tax. You can deduct the federal use tax on highway motor vehicles paid on a truck or truck tractor used in your farm business. For information on the tax itself, including information on vehicles subject to the tax, see the Instructions for Form 2290.

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 state and local general sales tax deductible?

State and local general sales taxes on nondepreciable farm business expense items are deductible as part of the cost of those items. Include state and local general sales taxes imposed on the purchase of assets for use in your farm business as part of the cost you depreciate.

Can you carry over unused conservation expenses?

Carryover of deduction. If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well.


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