Why agricultural income is exempt from tax


Both, rent or revenue from the agricultural land and income earned by the cultivator or receiver by way of sale of produce are exempt from tax only if agricultural operations are performed on the land. Cultivation of Land is a must: For the purpose of exemption it is necessary that the land should have been used for agricultural purposes only.


What is the total agricultural income exempt from income tax?

Total income, in addition to the net agricultural income, exceeds from the basic exemption limit. Note: The basic limit of the agricultural income exempt from tax is 2, 50,000 for individuals who are below the 60 years of age & Rs. 3,00,000 for individuals who are above the age of 60 years.

Is agricultural land exempt from capital gains tax?

(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)

How can a tax accountant help me navigate the agricultural tax exemptions?

Enlisting the help of a tax accountant can help you navigate the rules surrounding agricultural tax exemptions. Keep in mind that taking your land out of agricultural use can result in a bill for back taxes.

What do you need to know about agricultural taxes?

Understanding Agricultural Tax Exemptions 1 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 … 2 Staying on the Right Side of the Law. … 3 Bottom Line. … 4 Tips for Homebuyers. …


Why agriculture income is not taxed in India?

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.

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.

Are farmers exempt from income tax in India?

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 Government.

Should agricultural income be taxed?

As discussed above, agricultural income is exempt from income tax. However, the Income-tax Act has laid down a method to indirectly tax such income.

Do farmers 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.

How agriculture income is treated for income tax purposes?

Agricultural income is exempt under Section 10(1) of the Act so long as the income is derived from agricultural land situated in India. This income is, however, included merely for rate purposes and rebate is allowed on the same in accordance with the Finance Act.

What is agriculture income in income tax?

Agricultural income refers to the income earned or revenue generated from sources essentially premised on agricultural activities. These sources of income include farming land, buildings on or identified with agricultural land as well as commercial produce from a horticultural land.

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.

What is the exemption limit for agricultural income?

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.

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 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 …

Taxability of Agriculture Income

Agriculture income is exempt under section 10 (1) of Income Tax Act, 1961 if received in India (Agriculture income from any other country will be taxable)

Determination of nature of income : Agriculture Income or Income under the head PGBP

As per the meaning of Agriculture Income under section 2 (1A) , Income from sale of agriculture produce is considered under agriculture income with one exception under Rule 7.

What is agricultural income exemption?

An Overview on Agriculture Income Exemption from Income Tax. An income earned, or profit derived from commercial production of agricultural land covered in an agricultural income. Other sources of agricultural income include farming land, and commercial produce from horticulture land. The agriculture income is defined under Section 2 (1A) …

What are some examples of non-agricultural income?

The following are some examples of non-agricultural income: Income received from the poultry farming. Income received from the bee hiving. Any dividend which an organization pays from an agriculture income. Income received from the sale of spontaneously grown trees. Income received from the dairy farming.

What is the 54B of the Income Tax Act?

The Section 54B of Income Tax Act, 1961, provides relief to taxpayers who sell their agricultural land and use the sale to acquire another agricultural land will receive the tax benefit under Section 54B of Income Tax Act. However, these conditions must satisfy firstly:

What is rent in agriculture?

Rent is a consideration for the right to use the land. There is a lot of scope of possible sources of income which can be derived from the agriculture land. For instance such fees received for renewal of grant of land on lease. However, revenue generated from land does not include consideration received the sale of land.

How long does an agricultural land have to be used?

The agricultural land has to be used by an individual or parents for agricultural purpose for at least 2 years immediately before the date on which an exchange of land occurred. In case of HUF, the land has to be used by any member of HUF.

What is the revenue generated from the land located in India?

The revenue or rent generated from the land located in India are used for agricultural reasons. Income earned from the land by agriculture operations like processing of agricultural products for making it market-ready and saleable. Income derived from seedlings or saplings growing in a nursery.

Is capital gain taxed on agricultural land?

It must be known that under Section 10 (37), capital gain must not be chargeable to tax if agricultural land which has been compulsorily acquired under any law, and for that the consideration is approved by a central government or a banking regulator received on or after 1st Apr 2004.

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 …

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)

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.


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