How to file agriculture income tax return


If the agricultural income is well within INR 5000, the returns need to be filed through ITR 1, else ITR 2 needs to be used wherein there is a separate column for declaring the details of the income. The tax calculation done here is in accordance with the fact that the income from agricultural sources is falling under Section 2 (1A) of the IT Act.

Farmers must report their operating income and expenses on Schedule F (Form 1040). Net farm profit or loss is reported on line 34. Individuals also report this amount on Form 1040, line 18, and Schedule SE (Form 1040), line 1a. Net farm income is subject to self-employment tax.Jul 30, 2017


How to file income tax return for agriculture income in India?

 · Net agricultural income is greater than Rs. 5,000 during the year; and. Non-agricultural income is: Greater than Rs. 2,50,000 for individuals below 60 years of age and all other applicable persons. Greater than Rs. 3,00,000 for individuals between 60 – 80 years of age. Greater than Rs. 5,00,000 for individuals above 80 years of age.

How do I report Agricultural Program payments on my taxes?

If the agricultural income is well within INR 5000, the returns need to be filed through ITR 1, else ITR 2 needs to be used wherein there is a separate column for declaring the details of the income. The tax calculation done here is in accordance with the fact that the income from agricultural sources is falling under Section 2 (1A) of the IT Act.

How is agricultural income treated in income tax?

Answer (1 of 6): Sir, as such agri income is excluded from tax – but in order to bring the income and to tax the richer agri people, the tax calculation would like this 1. calculate your other income – then add agri income 2. calculate your tax on above 3. then add agri income with the basic inc…

How do I get proof of agriculture income for ITR?

 · 1. Agriculture income and non-agriculture income added 2. Calculate tax on total income 3. Add basic exemption limit to net agriculture income 4. Calculate income tax on step 3 5. Deduct the amount of tax calculated in step 4 from the amount calculated in step 2 6. Subtract rebate under 87A 7. Add health cess


How can I file agricultural 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.

Do farmers need to file income tax return in India?

No, only agriculture income from land situated in India is exempt from tax.

How is farm income tax return calculated?

Subtract interest expense, then add capital gains or subtract capital losses from net farm income from operations to calculate net farm income. This represents the income earned by the farm operator’s own capital, labor, and management ability.

Is agri income taxable?

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.

How much tax do you pay on agricultural income?

As per Section 10(1) of the Income Tax Act, 1961, agricultural income is exempted from taxation. The central government cannot levy tax on the agricultural income received.

Is farm income earned income?

Earned income includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own.

What is classified as farm income?

Defining Farming Income Any income you receive from tilling soil, raising livestock, maintaining racehorses or other such farming activities counts as farming income. In addition to income from dairy, fruit and tree farms, you also have to declare income from beekeeping and wild game reserves.

Can a farmer file Schedule C?

Sole proprietors must file Schedule C with their tax returns, and self-employed farmers report their income and expenses from their farming businesses on Schedule F.

Do farmers pay income 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.

Do farmers not pay tax?

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.

Do farmers pay tax in India Quora?

No, mostly they don’t. Since their only source of income is from Agriculture. Agricultural Income is ‘exempt’ from tax (Not amenable to income-tax) under Section 10(1) defined with Section 2(1A) of the Indian Income Tax Act, 1961.

Can we show agriculture loss in ITR?

29 September 2010 Agriculture income is exempt u/s 10. Any loss arising out of a source which is exempt cannot be set off against income from other heads. Agritulture loss cannot be set off against business income.

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 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.

Can you deduct farm insurance premiums?

If you take out a policy on your life or on the life of another person with a financial interest in your farm business to get or protect a business loan, you can’t deduct the premiums as a business expense. In the event of death, the proceeds of the policy aren’t taxed as income even if they are used to liquidate the debt.

Can you deduct insurance premiums for farm business?

You can generally deduct the ordinary and necessary cost of insurance for your farm business as a business expense. This includes premiums you pay for the following types of insurance.

Can you deduct highway tax on a tractor?

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.

Can you deduct farm business expenses?

You can deduct as a farm business expense the real estate and personal property taxes on farm business assets, such as farm equipment , animals, farmland, and farm buildings. You can also deduct the social security and Medicare taxes you pay to match the amount withheld from the wages of farm employees and any federal unemployment tax you pay. For information on employment taxes, see chapter 13.

Can you deduct breeding fees as farm business?

You can generally deduct breeding fees as a farm business expense. However, if the breeder guarantees live offspring as a result of the breeding or other veterinary procedure, you must capitalize these costs as the cost basis of the offspring. Also, if you use an accrual method of accounting, you must capitalize breeding fees and allocate them to the cost basis of the calf, foal, etc. For more information on who must use an accrual method of accounting, see Accrual Method Required under Accounting Methods in chapter 2.

What are the conditions for classifying farm income as agricultural income?

The conditions for classifying income derived from farm building as agricultural income are as follows: The building should be on or in the immediate vicinity of the agricultural land and is one which the receiver of rent or revenue or the cultivator, by reason of his connection with the land, requires the building as a house to stay …

What is the partial integration of agricultural income with non-agricultural income?

However, the Income-tax Act has laid down a method to indirectly tax such income. This method or concept may be called the partial integration of agricultural income with non-agricultural income. It aims at taxing the non-agricultural income at higher rates of tax. This method is applicable when the following conditions are met:Applicability:

What is agriculture in the Supreme Court?

Raja Benoy Kumar Sahas Roy where agriculture has been explained to consist of two types of operations basic operations and subsequent operations.

Who is excluded from using the taxable income method?

Thus Company, firm/LLP, co-operative society and local authority are excluded from using this method.

Is poultry farming a part of agriculture?

In cases where the activities have only some distant relation to land like dairy farming, breeding, rearing of livestock, poultry farming, etc. they do not form a part of agriculture income.

Is agricultural income taxable?

Through sale of such agricultural produce: Where the produce does not undergo ordinary processes employed to become marketable, the income arising on sale would generally be partly agricultural (exempt) income and part of it will be non-agricultural (taxable) income.

What are the operations that are carried out for growth and preservation of the produce?

The subsequent operations would include operations that are carried out for growth and preservation of the produce like weeding, digging soil around the crops grown etc and also those operations which would make the product fit for use in the market like tending, pruning, cutting, harvesting, etc. Income derived from saplings or seedlings grown in a nursery would also be considered to be agricultural income whether or not the basic operations were carried out on land.

What section of the IT Act is agricultural income?

The tax calculation done here is in accordance with the fact that the income from agricultural sources is falling under Section 2 (1A) of the IT Act.

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.

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.

Should you aggregate agricultural income?

One should always remember to aggregate the agricultural income while calculating tax since that can allow one to avoid unnecessary extra taxes or interest on taxes.

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.

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 section 2 of the Income Tax Act?

Section 2 (1A) of the Income tax Act details out the conditions wherein sources can be considered to be generating agricultural income. The section’s definitions basically point out the following as the sources for agricultural income –

Why is agriculture not taxed in India?

If the farm income is taxed, it is quite likely that food prices may go up significantly. As a result of this, other people who don’t earn enough money would find it tough to meet their needs.

Who is eligible to file ITR3?

The Current ITR3 Form is to be used by an individual or an Hindu Undivided Family who have income from proprietary business or are carrying on profession. The persons having income from following sources are eligible to file ITR 3 : Carrying on a business or profession.

Do you have to file income tax for agricultural income?

So, you’ll have to file income tax return and show agricultural income, even though they are tax-free.

Is agricultural income taxable?

Even though agricultural income is not taxable, you need to show it in your Income Tax return s. The income tax rules specify a system known as partial integration which depending on other incomes of yours calculate tax payable. For this calculation, agricultural income is also needed.

Is there an ITR form for agriculture?


Is there a perfect solution to evading taxes?

No solution is perfect in the world. For people who evade taxes, there are options available even after stringent application of rules. Nothing is as perfect as honesty and it’s probably a lot to expect from people. Therefore, some solution should definitely be provided to the menace going on in the name of agricultural income.

Should people disclosing agricultural income face scrutiny?

Perhaps it starts with proper scrutiny of all the income tax returns. People disclosing agricultural income should then be ready to face scrutiny of their assets. Further, income tax department should take notice of people disclosing income from multiple sources of which one is agriculture.

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 animal husbandry considered agriculture?

Ans. No income from animal husbandry is not considered as 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)

Is agriculture income taxable?

Ans. Agriculture income is exempt from the tax. However state government can charge agriculture tax, income from agriculture upto rupees 5000 is not taxable.

Is capital gain taxed in HUF?

However, as per section 10 (37), no capital gain would be chargeable to tax in case of an individual / HUF, if the agricultural land is compulsorily acquired under any law and the consideration of which is approved by the Central Government or RBI and consideration received on or after 01.04.2004.

Do you have to pay taxes on agricultural income?

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

What to do if your farm hasn’t made a profit?

Talk with a financial advisor if your farm hasn’t made a profit in several years. A professional can help ensure that you can successfully demonstrate that your farm is a business rather than a hobby.

How to prepare Schedule F?

The key to preparing an accurate Schedule F is to keep excellent records of your income, assets, crops, livestock, other assets, and various expenses throughout the year.

How many years do you have to make money to start a horse farm?

This means that you’ve made money in at least three of the last five tax years, or two out of seven years for breeding or raising horses. The IRS will consider other factors if you don’t strictly meet this requirement, however, including: You operate your farm like a business.

Is farming a business?

Your Farm Is a Business. Farming as a business is differentiated from farming as a hobby for tax purposes. Only farmers who operate as businesses are required to file Schedule F. You must be engaged in farming for profit to be considered a business.

Do you have to use the accrual method for calculating your income?

Likewise, you must use the accrual method for reporting your expenses if you use the accrual method for calculating your income. You must also report income from other sources in addition to your farming income on your Schedule F, such as federal disaster payments and money received from agricultural programs.

Is income reportable in the year?

Income is reportable in the year you actually receive it with the cash method of accounting.

Can farmers use crop method of accounting?

Most businesses must decide whether they want to operate and report their incomes on a cash or accrual basis, but farmers have a third option. They can use the crop method of accounting instead. Income is reportable in the year you actually receive it with the cash method of accounting .

What is agricultural income?

Agricultural income is defined under the Income Tax Act, 1961. According to Income Tax Law, agricultural income generally means: Any rent or revenue derived from land which is situated in India and is used for agricultural purposes. Any income derived from such land by agriculture operations including processing of agricultural produce so as …

Who is eligible to file ITR-2?

Thus persons having income from following sources are eligible to file Form ITR 2: A Director of any company and an individual who is invested in unlisted equity shares of a company will be required to file their returns in ITR-2.

What is ITR-1 form?

ITR -1 Form is a simplified one-page form for individuals having income up to Rs 50 lakh from the following sources:

What happens if you file your tax return using the wrong form?

If you file your return using the wrong form, then it will be considered defective. If the defect is not rectified, the return will be regarded as invalid, and the department will treat it as if the person did not file his return. Hence it is extremely important to know which ITR is applicable for which kind of assessee and for what income.

Is seedling income considered agricultural income?

Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Is India an agrarian country?

As India is basically an agrarian economy , several incentives and perks are offered, to those making a living through agriculture. In India, agricultural income refers to revenue derived from sources that include farming land, buildings on or identified with an agricultural land and commercial produce from a horticultural land.

Is net agricultural income auto-populated?

Net Agricultural income for the year which is an auto-populated figure computed as gross agricultural receipts reduced by expenditure and unabsorbed agricultural losses is also to be disclosed

What is agricultural income?

The definition of ‘agricultural income’ under section 2 (1A) provides that the following shall constitute agricultural income: (i) any rent or revenue derived from land which is situated in India and is used for agricultural purposes [ Section 2 (1A) (a)]

Why is income tax contentious?

Income Tax have various contentious issues despite being one of the oldest Law of the Land. On these issues assesse and revenue used to loggerhead each other on various form of Authorities. Taxation of AGRICULTURAL INOCME is also one of such contentious issue. One of the main reason for various dispute on Agriculture Income is attribute to the status of EXEMPT INCOME conferred by Income Tax Act vide section 10 (1) of the Act.

Is agricultural income added to total income?

Agricultural income will be added to total income for rate purpose only and relief to the extent of tax on agricultural income calculated separately adding it to the maximum threshold amount shall be provided to the assesse. For adding to the agricultural income for rate purpose, following two conditions be fulfilled.

Is fish farming taxable?

Whether Income from Fish Farming (Jhinga) is agricultural Income: Fish farming is not an agricultural activity as no basic agricultural operation is carried out on land hence income from fish farming is taxable as business income. However income of fish farming to a co-operative society is exempt u/s 80P of the Act.

Is jiggery a non-agricultural income?

Whether converting of jiggery (Gur)from sugarcane by the farmer himself is agricultural activity and thus exempt from tax: Generally both the commodity is separately marketable and conversion of Gur from sugarcane is not a necessary process performed by the cultivator to render the sugarcane fit for being taken to the market hence profit from sale of Jaggery will be bifurcated as agricultural and non-agricultural income if the farmer himself is involved but if someone else is involved than profit from sale of jaggery is taxable as business income.

Is sugarcane a non-agricultural product?

But in the case of tea, coffee, sugarcane where a major processing (change of very nature of the product) is being done, than income shall be bifurcate as agricultural and non-agricultural as per rule 7, 7A, 7B and 8 of the Income tax rule.

Is profit from agriculture produce exempt from agricultural income?

6. Whether profit from agriculture produce is exempt in a case where the subsequent process is undertaken on non-agriculture land/premises to make it marketable: Subsequent process on Agricultural produce to make it marketable is a part of agricultural operations and profit on sale of such produce shall be treated as agricultural income only. Say for example trashing of Rice, wheat, mustard, etc is part of agricultural operations only even though these activities are carried out on non-agricultural land or building.


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