• Aug
  • 01
  • 2015

Agricultural Income – Tax treatment / Taxability

Article ID 14455 | Posted In Income Tax | , | 124 Comments » Print Friendly and PDF

 CA Sandeep Kanoi, Riya Dani

Introduction:

Agricultural income earned by a taxpayer in India is exempt under Section 10(1) of the Income Tax Act, 1961. This means that income earned by way of agricultural operations, as mentioned in Section 2(1A) of the Act, is not taxable. The reason for exemption of agricultural income from Central Taxation is that the Constitution gives exclusive power to make laws with respect to taxes on agricultural income to the State Legislature. However, while computing tax liability on non-agricultural income, agricultural income is also taken into consideration. Meaning of Agricultural Income:

Section 2 (1A) of the Income Tax Act, 1961 defines “agricultural income” as an income under the following three sources:

(i) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes: The assessee will not be liable to pay tax on the rent or revenue arising from agricultural land subject to the conditions:

(a) The land should either be assessed to land revenue in India or be subject to a local rate assessed and collected by officers of the Government.

(b) In instances where such a land revenue is not assessed or not subject to local rate, the land should not be situated within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board, and which has a population of more than ten thousand (according to the last preceding census which has been published before the first day of the previous year in which the sale of land takes place); or it should not be situated:

  • more than 2kms. from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or
  • not being more than 6kms. from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or
  • not being more than 8kms. from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.

(c) The revenue must not include any income arising out of transfer of such land.

Further, a direct nexus between the agricultural land and the receipt of income by way of rent or revenue is essential. (For instance, a landlord could receive revenue from a tenant.)

(ii) Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind or any process ordinarily employed by cultivator or receiver of rent-in-kind so as to render it fit for the market, or sale of such produce.

(iii) Any income derived from any building owned and occupied by the assessee, receiving rent or revenue from the land, by carrying out agricultural operations: The building must be on or in the immediate vicinity of the land. It must be used by the assesee as a dwelling house or store-house or an out-building, in connection with the land.

Hence, we can consider income attributable to a farmhouse as an agricultural income, subject to the above conditions. Normally, the annual value of a building is taxable as ‘income from house property’. However, in the case of a farm house, the annual value would be deemed agricultural income and thus, be exempt from tax.

In addition to the above, income derived from saplings or seedlings grown in nursery is also considered as agricultural income.

In order to consider an income as agricultural income, certain points have to be kept in mind:

(i) Existence of a land.

(ii) Usage of land for agricultural operations: Agricultural operations means efforts induced for the crop to sprout out of the land. The ambit of agricultural income covers income from agricultural operations, which includes processes undertaken to make the produce fit for sale in the market. 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.

(iii) Cultivation of Land is a must: Some measure of cultivation is necessary for land to have been used for agricultural purposes. The ambit of agriculture covers all land produce like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands. However, the breeding of livestock, aqua culture, dairy farming, and poultry farming on agricultural land cannot be construed as agricultural operations.

(iv) Ownership of Land is not essential: In the case of rent or revenue, it is essential that the assessee has an interest in the land (as an owner or a mortgagee) to be eligible for tax-free income. However, in the case of agricultural operations, it is not necessary that the cultivator be the owner of the land. He could be a tenant or a sub-tenant. In other words, all tillers of land are agriculturists and enjoy exemption from tax. In certain cases, further processes may be necessary to make a commodity marketable out of agricultural produce. The sales proceeds in such cases are considered agricultural income because the producer’s final objective is to sell his products.

Incomes which are treated as Agriculture Income:

(a) Income from sale of replanted trees.

(b) Rent received for agricultural land.

(c) Income from growing flowers and creepers.

(d) Share of profit of a partner from a firm engaged in agricultural operations.

(e) Interest on capital received by a partner from a firm engaged in agricultural operations.

(f) Income derived from sale of seeds.

Incomes which are not treated as Agriculture Income:

a. Income from poultry farming.

b. Income from bee hiving.

c. Income from sale of spontaneously grown trees.

d. Income from dairy farming.

e. Purchase of standing crop.

f. Dividend paid by a company out of its agriculture income.

g. Income of salt produced by flooding the land with sea water.

h. Royalty income from mines.

i. Income from butter and cheese making.

j. Receipts from TV serial shooting in farm house.

k. Income from film shooting on agricultural land: This point was considered by the Madras High Court in B. Nagi Reddi v CIT ((2002) 125 Taxman 20). In this case, the assessee had shown certain income from film-shooting in his premises, which was known as Vijaya Gardens, and he used to recover charges for the same. The assessee claimed that those charges amounted to agricultural income as the said premises were used for agricultural activities also. The assessing authority, however, treated it as business income as the income had no direct link with the agricultural operations.

l. Income from Plantation companies: Many plantation companies have launched schemes that offer tax-free agricultural income. These schemes are of various types: while some give investors leasehold rights to the land, some give rights to trees at a certain level above the ground, even as others offer rent. If the scheme gives rise to ownership or leasehold interest in the land, then the income is considered to be rent or revenue in the hands of the investor.In the absence of ownership or leasehold rights, income from plantation companies is either considered interest or non-agricultural income chargeable to tax.

(The list above is not an exhaustive list. It broadly covers the scope of agricultural income.)

Note:

a. Agricultural income is considered for rate purpose while computing the tax liability for Individual/HUF/AOP/BOI/Artificial Judicial Person.

b. Losses from agricultural operations could be carried forward and set off with agricultural income for the next eight assessment years.

c. Agriculture income is computed in a manner similar to business income.

Exceptions:

a. If a person sells processed produce without carrying out any agricultural or processing operations, the income would not be regarded as agricultural income.

b. Likewise, in cases where the produce is subjected to substantial processing which changes the very nature of the product (for instance, canning of fruits), the entire operation is not considered as an agricultural operation. The profit from the sale of such processed products will have to be apportioned between agricultural income and business income.

c. Income from trees that have been cut and sold as timber is not considered as an agricultural income since there is no active involvement in operations like cultivation and soil treatment.

Tax on sale of agricultural land: Before 1970, profit on the sale or transfer of all agricultural land was considered rent or revenue derived from the land. Such profit was, therefore, tax-exempt as agricultural income. There were several favorable judgments of various High Courts on the issue. However, via a retrospective amendment that took effect from April 1, 1970, land qualifies to be an agricultural land if the prescribed conditions are satisfied. An agricultural land does not form part of the definition of a capital asset and hence, there will be no capital gains on the sale of such land.

Any other land not forming part of the above will be a capital asset and sale of the same shall attract tax on capital gains subject to Section 54B, which is explained below.

Section 54B: Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases

Section 54B gives relief to a taxpayer who sells his agricultural land and acquires another agricultural land from the sale proceeds.

Conditions to be satisfied to claim the benefit of this Section:

a. The assessee must be an individual or a HUF.

b. The agricultural land should have been used for agricultural purposes. It may be a long term asset or a short term asset.

c. It must have been used either by the assessee or his parents for agricultural purposes in atleast two years immediately preceeding the date on which the transfer of land took place.

d. The assessee should have purchased another land, which is being used for agricultural purposes, within a period of two years from the date of sale.

Note: In case of compulsory acquisition, the period of acquisition of new agricultural land will be determined from the date of receipt of compensation. However, as per Section 10 (37), no capital gain would be chargeable to tax in case of an individual or HUF if agricultural land is compulsorily acquired under any law and the consideration of which is approved by the Central Government or RBI and received on or after 01-04-2004.

e. The whole amount of capital gain must be utilised in the purchase of the new agricultural land. If not, the difference between the amount of capital gain and the new asset will be chargeable as capital gains and the tax will be computed accordingly.

f. The new asset purchased should not be sold within a period of three years from the date of acquisition.

g. If sold, the cost of the new asset will be reduced by the amount of capital gain (claimed as exemption under Section 54B) for the purpose of computing tax on capital gains.

h. Where the amount of capital gain is not utilised by the assessee for the purchase of the new asset before the due date of furnishing his return of income, he may deposit it in the Capital Gains Account Scheme (CGAS) of any specified bank.

i. The return of income of the assessee should be accompanied by the proof of such deposit.

j. In such a case, the cost of the new asset shall be deemed to be the amount already utilised by the assessee for the purchase of the new asset together with the amount deposited in the CGAS.

k. If the deposited amount is not utilised for the purchase of the new asset within the specified period, then the unutilised amount shall be taxed as income in the year in which the period of two years from the date of sale of the original asset expires.

Taxability of Agricultural income post amendment by Finance (No.2) Act, 2014

Agricultural income is considered for rate purposes while computing the income tax liability, if following two conditions are cumulatively satisfied:

  1. Net Agricultural income exceeds Rs. 5,000/- for previous year, and
  2. Total income, excluding net Agricultural income, exceeds the basic exemption limit.

Note: If aggregate agricultural income of the assessee is up to Rs. 5,000/- during FY 2015, then the entire income shall be exempt from tax. Accordingly, you need to disclose the agricultural income in the income tax return (ITR) 1 form to be compliant from the disclosure perspective. But if the agricultural income exceeds Rs.5,000, then form ITR 2 applies, which has a separate column for disclosure of agricultural income.

Once the aforementioned conditions are satisfied then we shall compute the Tax liability in the following manner:

♠ First, include the Agricultural income while computing your income Tax liability.

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/-. Thus, income Tax amount as per this step shall be INR 95,000/- for an individual who is below the age of 60 Years during the P.Y. 2014-15.

♠ Second, add the applicable basic tax slab benefit, as applicable, to the Net Agricultural income. Thus, per our example mentioned above we shall add INR 2,50,000/- to INR 1,00,000/- as the applicable Tax slab benefit available to an individual below 60 Years of age is INR 2,50,000/-. Now we will compute income Tax on INR 3,50,000/- (Tax slab benefit 2,50,000 + Net Agricultural income 1,00,000). The amount of Tax shall be INR 10,000/-.

♠ Thirdsubtract the Tax computed in Second step from the Tax computed in First step = INR 85,000/-. Thus, this is the income Tax liability subject to deductions, Education Cess etc., as applicable.

This process of computation is, however, followed only if the assessee’s non-agricultural income is in excess of the basic exemption slab.

Clearly, despite agricultural income being tax-exempt, assessees have to be cautious while dealing with such income. They must make sure that they aggregate agricultural income with their total income to avoid interest payments and possible penalties for concealment of income. Assessees must also maintain credible records to provide the tax authorities with proof of ownership of agricultural land and evidence of having earned agricultural income.

To conclude, there is enough scope for taxing income from activities which are non-agricultural in nature. In fact, it is well known that agriculturists themselves do not have taxable income, taking into account the fact that when it is divided amongst family members who are involved in agricultural operations, each one of them would have income within the exemption limit. However, there are hundreds of thousands of middlemen like wholesalers, retailers, distributors, etc. who earn substantial income from trading in agricultural produce as well as fruits, flowers, etc. Such income or profits are fully taxable under the present law and, therefore, if concerted efforts are made by the Tax Department to recover tax from them, the need for widening the tax base to rope in agriculturists and farmers, would be eliminated.

Tax Saving Tip:

Form a company or a partnership firm for the sole purpose carrying on your agricultural operations. As indirect effect of agricultural income is not applicable in a company or a firm, the complete amount would become exempt from taxation.

Frequently Asked Questions:

1. Does interest on arrears of rent qualify as agricultural income and will this be exempt from tax?

Sometimes, a tenant could slip up on rent or revenue payments (either in cash or kind) and have to pay arrears. If the landlord charges interest on such arrears, the income would not be considered as an agricultural income, but would be deemed income by way of interest and would, hence, be chargeable to tax. While ‘rent’ presupposes periodical and pre-determined payment (either in cash or kind), ‘revenue’ implies a sharing arrangement that depends on the actual agricultural produce. In either case, ownership of agricultural land or interest in such land is essential, which means, the owners of agricultural land, tenants who are given a sub-lease, and people who are mortgagees of agricultural land, all enjoy tax-free agricultural income.

2. If agricultural produce is processed to make it marketable at a place other than the agriculture land, then the amount charged for such processing will be an agricultural income or not?

Any processing done on Agricultural produce to make it marketable is a part of agricultural operations and such amount recovered will be treated as agricultural income only. Say for example trashing of wheat, mustard, etc is part of agricultural operations only and the amount recovered will be treated as agricultural income only no matter processing takes place on the land itself or some other place.

But in certain cases like in the case of tea, coffee, sugarcane where a major processing (change of very nature of the product) is being done, then some part of the processed produce (tea, coffee & sugar) is taxed as non-agricultural income and rest is exempt as agricultural income.

3. What if agriculture operation is carried on urban land?

If agricultural operations are carried out on land, either urban or rural, the income derived from sale of such agricultural produce shall be treated as agricultural income and will be exempt from tax.

4. If any industrial organization grows crops and sells half of the produce as raw material in the market and remaining (further processed) as finished goods, what will be the tax treatment?

Agricultural income is exempt from income tax. It does not matter whether the agricultural operations are done by an industrial organization or an individual. If any industrial organization grows crops and sells half of the produce as raw material in market and remaining (further processed) as finished goods, the income which is earned on the first half of produce (sold in market as raw material) is totally exempt from tax.

In case of the remaining produce which is further processed, scheme of presumptive taxation is applicable. Rule 7, 7A, 7B & 8 of Income tax Rules deals with such type of income. Rule 7A deals with Income from manufacture of rubber, 7B deals with Income from manufacture of coffee and Rule 8 deals with Income from manufacture of tea. Rule 7 says that in cases where income is partially agricultural in nature and partially from business, the market value of the agricultural produce which has been raised by the assessee or received by him as rent in kind and which has been utilised as a raw material, shall be deducted from the sale receipts and will be treated as agriculture income. The remaining will be considered as non agricultural income.

5. In my agriculture farm, I have 5 cows in Pune (Maharashtra). The product being milk is the main produce, and not a byproduct. Is this income an agriculture income or a taxable income? (This milk is sold to dairy product plant in nearest Co-op Society).

Dairy farming is not an agricultural income.

6. Why rent on land is treated as agricultural income?

Rent received from agricultural land used for agricultural purpose is treated as agricultural income. This is prescribed by the law.

7. I have a business income of Rs 3,00,000 and agricultural income of Rs 4,00,000. These figures relate to the Assessment year 2014-15. How will my tax liability be computed?

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. The inclusion of Agricultural income for rate purpose is only required if total income of an individual exceeds Rs. 2,50,000/- (assessee being aged less than 60 years of age).

Particulars Amount in Rs.
Business Income 3,00,000/-
Agricultural Income 4,00,000/-
Income Including Agricultural Income 7,00,000
Tax on 7,00,000/- 65,000/-
Less: Rebate on Agricultural Income
(Tax on Rs. 4,00,000 + Rs. 2,50,000 being basic exemption) 55,000/-
Net Tax Payable 10,000/-
Add: Ed. Cess & Sec. & Higher Ed. Cess @ 3% 300/-
Total tax Payable 10,300/-

 8. Can Interest on Crop Loan be claimed as an exemption?

The interest earned on Crop Loan cannot be claimed as an exemption by the provider of loan since the condition of ownership of land being not essential holds true only if the assessee has interest in the land. The provider of the loan may not have an interest in the land because it may be his ordinary business to provide Crop Loan. However, the farmer to whom the crop loan is provided can claim the same as a deduction while computing his tax liability.

9. If an assessee sells the fruits of the trees planted by him around his home, will the income so earned be agricultural income?

The trees planted by him should be on a land which can be classified as an agricultural land by fulfilling the conditions mentioned earlier in this article. If the land is agricultural, then the income earned by selling of fruits can be treated as agricultural income.

10. I have taken certain agricultural land on lease and crops are being grown on the said land for many years. Now the said land alongwith growing crops has been acquired by the Govt. The Govt. paid separate compensation for the land and the crop. Whether the compensation received in lieu of crop is agriculture income or not? Further note that assessee has not further invested the amount in agriculture land received as compensation against crop.

The compensation paid for the crops by the Govt. can be considered to be as good as income earned by purchase of standing crop, which is not an agricultural income. Hence the compensation against crop is taxable in the hands of receiver of the compensation.

11. Whether income earned from export of agricultural produce is exempt from income tax?

The conditions for considering the income as agricultural in nature have to be satisfied if the agricultural produce has to be exempt from income tax. Middlemen dealing in trade of agricultural produce are generally not entitled to exemption due to lack of satisfaction of the conditions.

12. I have an income of Rs.1,45,000 from my business and an agricultural income of Rs. 8,40,000. Do I need to file the return of income?

The process of computation of tax liability is followed only if the assessee’s non-agricultural income is in excess of the basic exemption slab. In this case, the income from business of the assessee is lower than the basic exemption limit. However, the returns have to be filed with regards to the disclosure of agricultural income.

13. An assessee wants to buy farms which bear coconut trees, on a lease for a period of one year. State whether sale of coconuts is said to be an agricultural income or not?

The land on which the coconut trees are planted should be an agricultural land which can be classified by fulfilling the conditions mentioned earlier in this article. If the land is agricultural, then the income earned by selling of coconuts can be treated as agricultural income.

14. I had sold an agricultural land in a rural area, which is outside jurisdiction of the Municipal Authority. Whether the sales proceeds are exempt or taxable?

The scope of agricultural income excludes the revenue which is earned by transfer of agricultural land not falling under the definition of Capital assets u/s. 2(14). By definition of a capital asset under Section 2(14), an agricultural land in an area falling out of jurisdiction of the Municipal Authority (which has a population of more than 10,000), is not a capital asset. Section 10(37) allows income from transfer of such a land to be classified as a capital gain via clause (i). Under Section 54B, a capital gain arising out of this transaction will be exempt provided the conditions (mentioned earlier in this article) are satisfied.

15. Is receipt from sale of rubber trees an agricultural income?

Yes, receipt of sale of rubber trees is an agricultural income if the conditions for land being agricultural in nature are satisfied.

CA Sandeep KanoiRiya Dani(Article was First Published on 24.04.2012 and was republished with amendment on 31.07.2015. Article was Originally written by  CA Sandeep Kanoi and further improved , edited and updated by Riya Dani)


124 responses to “Agricultural Income – Tax treatment / Taxability”

  1. CMA ANAND says:

    Sir,

    Whether, income derived from letting agriculture land for commercial purpose is subect to income tax ?

  2. inder says:

    sir,
    In F.Y. 2014-15 will get
    1) Net Salary-1,44,000/-
    2) Net Agriculture income- 4,70,800/-

    How much I have to pay tax? Please explain calculation. – See more at: http://taxguru.in/income-tax/income-tax-treatment-taxability-of-agricultural-income.html#comment-84021

  3. KIRAN K R says:

    A company that derives its income from sole agriculture and its annual income exceeds 10 lac per year will it be exempted from taxation.
    what kind of company should be formed to get complete exemption from paying taxes

  4. Mallikarjuna says:

    Dear Tax Advisor,

    I have joined banking sector in the year 2003 and till date, I have worked in different banks for period of 11 as of now. My providend fund accumulated withdrawn in the year 2014 and my previous employer deducted tax on PF withdrawal.

    Please advise me in my case tax is applicable or not.

  5. Kailash says:

    I want to know that the maxmium agricutural land limit hold by a single person in haryana.

  6. Paulson says:

    Whether Pvt Ltd company will get exemption from agricultural income. In your article, company is not included and also dividend from company earning agricultural income is not exempt. Is lease deed to be registered in Sub Registrar office of agricultural land for tenant. Is it necessary to prove purchase of seeds, produce, workforce etc

  7. r.k.garg says:

    I want know if I buy apple from Shimla and than put on cold starage and aft some time I sale in market and that profit will be tax free or taxble

  8. Vikram says:

    R/sir
    If I sold my agriculture land approximate 45lakh,and this money I draw in bank for fd.can I exempt in tax,please tell me how many years I rebut from tax

  9. CA. JAWED AKHTAR says:

    Sir,
    Please provide the formate of lease agreement for contract farming.

  10. Ramakrishna says:

    Does Crop Loan Interest has some exemption?

  11. Ramakrishna says:

    Does Interest on crop loan has some exemption?

  12. Ravi Kumar says:

    Sir, if I sell the fruits of the trees planted by me around my home, will the income so earned be agricultural income? please reply

  13. laxman says:

    how much income iexemputed on agriculture per annum what is the limit that can be earned from 1 acre of land
    2 if any nri or relative send amount to india is tha amount taxable

  14. vinod garg says:

    I plan farming in green house ( pollyhouse ). I plan to grow flower and vegetable in this green house for export. Is the income from this green is taxable or this is a agriculture income which is exempt. please post me answer.thanks Vin

  15. Prabhat Shrimali says:

    Dear Sir,

    Good Evening..

    I’m planning to start a dairy and poultry farm in future. I just want to know what kind of taxes (e.g Income Tax, Sales Tax) and how much I’ll have to pay on certain income I got from above farming?
    Also what should I do in order to get exempt from or reduce these taxes?

    Thanks in advance.

    Prabhat Shrimali

  16. S. K. Goyal says:

    I have taken certain agricultural land on lease and growing crops on the said land for many years. Now the said land alongwith growing crops has been acquired by the Govt. The Govt paid separate compensation for the land and the crop. Whether the compensation received in lieu of crop is Agriculture Income or not. Further note that assessee has not further invested the amount in agriculture land received as compensation against crop.

    S.K. Goyal
    9312289953

  17. karthik kumar says:

    nan palpannai start ethannai % tax gov pay pannavendum

  18. JIGNESH BRAHMBHATT says:

    Income from Jinga sales (prownze) is liable for incometax or not.

  19. venkataramana says:

    My father is cultivating the land on Name for past 8 years. I did not claim the agriculture income till now. Now if I want to claim last 8 years earnings, can I do it in this year?

  20. sridhar says:

    i want know how to fill FORM J & where to get FORM J

  21. mewa singh beniwal says:

    I belong to a village and have agriculture income. I have Term Deposits in Village Bank itself. Please advise if TDS will be deducted against interest on term deposit and method to save the TDS. Please respond immediately.

  22. shashidhar says:

    Income from export of agricultural produce whether exempt from income tax? If yes Under section
    Shashidhar

  23. Mahaveer says:

    I work for MNC company at Bangalore and I also own 5 acres for Agriculture land which came to my name from my Parents. Can I apply for tax rebate on my my monthly salary?
    Mahaveer

  24. Sriram says:

    Sir,
    I have an income of Rs.145000 from my business and an agricultural income of Rs.840,000. Do i need to file the return of income

  25. Kunal Shah says:

    If any one wants to become farmer or purchase very cheap agricultural land let me know. I can help save alot of taxes
    9819767612
    kunal.16 at hotmail dot com

  26. prakhar says:

    sir
    my uncle sold the agriculture land in urban area in f.y 12-13. he invest his money of net consideration in purchases of agriculture land before filling the return u/s 139(1).so that he can claim the exemption u/s 54B.He has made the payment through RTGS against the purchases of new agriculture land and also take the possession of the new agriculture land BUT COULD NOT register this land through the registrar by paying stamp duty.
    can he right to claim exemption u/s 54b
    prakhar

  27. anil k says:

    I m salaried peson & having taxable income I want to purchase agricultural land can I purchase it on my name or wife’s name or my huf account …pls suggest … reasons … benefits in income tax…. regards… anil k

  28. Dr.Jatin says:

    sir.. I am planing to start a aquaculture farm on a marshy land which is certified dept of fisheries.will my income on this farming will be tax free??

  29. prakasam says:

    tamilnadu Government Subsidy (for dry district) taxable or non taxable

  30. patil says:

    MY FRIEND HAS AGRICULTURE LAND 50 ACRES IN ANDHRA PRADESH & PARTNERS SELF & MRS. 1) this PARTNERS ARE OK FOR THE PARTNERSHIP FORM. 2) Can PURCHASE AGRICULTURE LAND. 3) Retun it file is compulsory 4) Agriculture land celling acts in andhra pradesh 4) can increase partnership members

  31. Sandesh Bhoopalam says:

    Sale of Saplings is Not an Agricultural Income.

  32. RAJEEV says:

    RESPECTED SIR,
    MY Question is Mud extracted from agriculture land and sold , Whether consideration received on sale of mud of agriculture land is taxable or not, (agriculture land is not urban agriculture land), kindly explain.
    With Regards,
    Rajeev Puri

  33. Vijay says:

    I rear rabbits? is this taxable? if its taxable what percentage tax it attracts?

  34. SACHIN GARG says:

    thank you of provid me information

  35. navjot says:

    heloo sir plz sought out my query my q. is in the income tax act agriculture land will be considered as an Rural Agriculture Land if it is not situated any area within the distance measured aerially of not more than the limits given by IT dept.but during the course of assessment in Income Tax act 2013 what kind of document will be considered an appropriate proof that a parti cular land is “rural Agriculture Land”. plz help me plz answer this question sir…

  36. Bhoopathy Bhaskaran says:

    Sir, I have an agricultural income of 5,00,000 rs last year. Now to claim agricultural tax free income what are the reciepts and documents required to show to the income tax officers in case of any enquiry etc.

  37. bhaskara vukkem says:

    sir,

    we want to take farms which having coconut trees for lease a period of one year sale of coconuts is agricultural income or non agricultural income

  38. suresh gupta says:

    we have 5000 Sqft agriculture land and on it have 100 cow and sale milk in open market is it agriculture income or not

  39. S JEGADEESAN says:

    Dear Sir,
    I wish to clarify a doubt .i.,e.A Partnership firm doing the business of export the live plants.Now it want to file the IT Return.How that firm can claim the exemption? i.e. where Should I mention the Exemption of Income(Agri Income) details in ITR-5?

  40. maninder says:

    Sir,
    if income from post office commission is Rs56000per annum and agricuture income is rs60000 per annum then which ITR form should be used ?

    and is it needed to show the agriculture income in ITR form while the total of income from commission and agriculture income is less than Rs150000?

    I am asking this question in refrence following line in your article so please guide
    “The inclusion of agricultural income for rate purposes is only required where the total income exceeds Rs 1,50,000.”

  41. Chandan Singh says:

    My assessee is having a godown at Barauni (Bihar). The godown is used fo storage of agricultural product. So,Whether the income derived from such dodown is taxable or not. Please reply

    CA Chandan Singh

  42. Piyush Kumar says:

    sorry,

    income my agriculture like sale of tree or rent received from agriculture land etc

  43. Piyush Kumar says:

    Dear Sir,

    I want know that if we have received many approx 5 lakh to 10 lakh mor than so will we taxble income.

  44. jeetu patel says:

    Sir, I want calrification regarding I had sold agricultural land in Rural area which is outside the Municiple area it is exempt or taxable if is it is exempt than where I report in My ITR-3 I am a partner in firm.

    Pl. reply urgently

  45. MONANK says:

    HI WANT TO ASK IS THERE ANY LAW IN WHICH IT IS BEEN FIXED IF U ARE HAVING 25 ACRES OF LAND THEN U CANT HAD AN INCOME MORE THAN THIS MUCH AMOUNT IS THERE ANY FIX RATIO OF CALCULATING INCOME PER ACRES OR WHAT PLEASE GUIDE THANKS AND WAITING FOR YOUR REPLY

  46. prajakta says:

    I need education loan bt my parents are farmer den how to proceed n show income as wel as tax
    plzzz help me out

  47. Mehul says:

    where exemption is claimed u/s 54B, and the new Agri Land is sold within period of 36 months (1) for which year taxability arise, the year of original sale or the year in which new land is sold (2) Agri Land is not capital asset, so if i reduce COA of new asset by amount of exemption taken (say any amount), the gain should not be taxable because it is not a capital asset (2) if diversion for question 2 then under which head of income calculation shall be made.

    Eagerly waiting for reply.

  48. Rohit Pandey says:

    Sir,

    i’m looking for Dairy farming & Herbal Products
    pls. suggest me what are the subsidy or Rebate on the above.
    although i found land for the same,trying to get bank loan for dairy farming.

    I have a pan card but due instability of job i’m not submitting any of my returns(2010-12), is it possible to pay tax of all previous year i.e 2010-12.

    if it is possible by paying penalties for same then kindly confirms me.

    Thanks

  49. abhishek says:

    Do companies engaged in the business of cultivation of cash crops need to pay agriculture tax.

  50. SHABBYSHABBIR TAIYEBALI VAKANERWALA says:

    We are facilitators can help people getting LEGAL FARMER Status by which he or she can buy any agriculture land in any part of INDIA and enjoy benefits of present and post FDI benefits on AGRICULTURE income and capital gains.

    Regards.
    Shabby.

  51. Renu says:

    Hi, 
    I have a firm which earns revenue from agricultural activities. My drawings from this firm of which I am the proprietor, is deposited in a savings account which is in my personal name. This amount earns me substantial SB interest. How will this SB interest which is earned, be treated from a taxation standpoint?
    I also have some FDs(Fixed Deposits) in my name whose source is agricultural income. How will the interest earned from these FDs, be treated from a taxation standpoint?

  52. romil says:

    1 whether profit on sale of livestock used in agricultural operations are liable  to capital gain or not?

  53. Pradeep Kumar says:

    Sir,
    I have purchased agricultural land 8 bighas and 3 biswas in delhi on 06-0601991 of Rs.7,93,000/- (Rupees seven lacs ninty three thousand only) and land was muted in my name but on 8-6-92land was acquired by DDA for residential township Dwarka. Due toclerical mistake my land was categorised low rate land and I got compensation only 3,93, 000/- by AWARD in Oct. 1994 that I went to Hon`ble court of law for actual compensation, finally now I got Rs.3400000/-(Thirty four lacs), in which I got Rs. 2400000/-(Rupees twenty four lacs only) as interest plus soletium ect and at the time disbursement of amount hon`ble court deducted TDS at the rate of 10% about 245000/- only.
    I am not awrae how much tax I have to deposite in the Income Tax or should I file capital gain, because now my land `s actula cost in many crores. I am very much looser.

    I shall be very grateful and thankful if you kindly guide meon the above mentioned request.

    Looking forward for your favourable reply.

    Thanks & regards
    Pradeep Kumar

  54. RUPAK DHAR says:

    what is the section of relief on agricultural income.

  55. Harit says:

    If I enter into an agreement with land owner of agriculture land, where I take the land from them on lease / rent basis , pay them rent and do the agricultural operations by myself. Will the income from the sale of the agriculture produce (produced by me n my team), be considered as agricultural income and exempt from tax? 

  56. savitha says:

    My salary income is Rs. 3,75,569.00 and my agriculture income is 7,87,462.00. What is the amount of tax to be paid?

  57. Dhananjay Desai says:

    My father sold agreecultural land for ruppes 1400000/- Should he pay income tax?

  58. karan khan says:

    Dear syam kumar i think Tax pay our responsibility, not a Borden   

  59. karan khan says:

    plz tell me when we eligible to pay for advance tax

  60. Syam Kumar Manda says:

    Iam going to start a Dairyfarm Vth 40 Buffalos. The Project Report was done for 60lacks and iam going to take loan from SBI. Already iam filing returns since 2008. I have 12 Acres of Agricultural land which i have got  after my fathers death through a registered WILL. so every year i used to file agricultural income as 1,90,000 and my business income nearly 2lacks. I have stopped my old business. Now iam starting Dairy farm so, kindly assist me which is the best tax saving way to start the dairy farm, imean on individual name or else have to start on sole proprietor by registering a firm or partnership firm.
    kindly assist me as early as possible.
    Regards,
    Syam kumar Manda.

  61. CHANDRASEKHAR.B says:

    dear all,

    please clarify whether the service tax will apply for the royalty on use of trade mark for selling the sowing seeds (agricultural products)

  62. food says:

    Hello colleagues, its great post regarding education and entirely defined, keep it up
    all the time.

  63. SHASHI KUMAR SINHA says:

    please sent some example regarding agriculture income

  64. Arun says:

    there was the land acquired by government to extend the highway and GOvt paid the compensation for the land. Please let me know whether that compensation is taxable ? 

  65. admin says:

    No. You only have to pay stamp duty and Registration Fees.

  66. clawtin says:

    Respected Tax Guru Sir 

    i have a doubt i am planning to buy a Residential Plot of 200 Sq Yards in Hyderabad near manasanpally Sir Do i have to pay ANY Tax for the PLOT????

  67. koushik says:

    sir we are two brothers planning to start a dairy farming business on my mothers agricultural land. please advice us regarding the following options to start the business w.r.t tax benefits
    1. As HUF
    2. As a Partnership
    3. In Individual capacities

    please reply to my mail as soon as possible sir

    note: the above business is on agricultural land in rural area and the gross receipts were about 25 – 30 lakhs per annum. Also advise us whether we require to file a return if we start the business this AY.

  68. vikas sharma says:

    hello,

    we are installing a cold store unit and there is exemption in central excise tax on the purchase of machinery from manufacturer and we have provided a bank gurantee in favour of assistant commissioner for this and now they are asking for the registration of farm with central excise . Is it necessary to register the farm with them as it is only service unit for taking the benifit of central excise

  69. Sweety says:

    You can consider it as an agricultural land. No issues.

  70. Sweety says:

    We are required to consider the Net Income available after deducting the deductions available

  71. Sweety says:

    Hey for agriculture income there is nothing like slab rate applicable- kindly visit google- u shall be available with all the slab rates wrt financial year for individual, senior citizen

  72. Sweety says:

    Its absolutely fine, but computation of tax payment should be taken care of as you shall be benefited in the form of rebate. If no benefit is availed then kindly revise it- revising the return doesn’t attract scrutiny at all.

  73. K L SAINI says:

    SIR WHAT IS THE DEFINITION OF RURAL AGRICULTURE LAND FOR CAPITAL GAIN PURPOSE.If there are two conditions for testing rural agriculture land please tell whether theres are cumulative or not

  74. CA Ramanpreet Singh says:

    Is it rural or urban?? if rural then it is exempt else taxable

  75. CA Ramanpreet Singh says:

    Tax implication will be the same as in case of any other business.There is no exemption as regards poultry or dairy farming business.If it is sole proprietor business then slab rates will be applicable, if firm or company then flat 30% on taxable income.

  76. Ritesh says:

    Hello Sir,
    I’m planning to start a dairy and poultry farm in future. I just want to know what kind of taxes (e.g Income Tax, Sales Tax) and how much I’ll have to pay on certain income I got from above farming? Also what should I do in order to get exempt from or reduce these taxes?

    Thanks in advance.

    Ritesh

  77. Vasishta says:

    Dear Sir,
    We are an agriculture company. Seeking funds to expand our operations. Investors are keen to know whether returns (payback principal + part of profit generated) are exempted from tax. Investor are offered stake in the company. Once they exit, are their returns tax free? If we pay dividends to investors, are these exempted from central and state taxes?
    Thank you / Kind Regards
    Vasishta

  78. K L SAINI says:

    sir
    plz tell me that a sold a agriculture land is taxble yes or not?

  79. pooja varshney says:

    income received from letting a land situated in india which is used for agricultural operation..is it agricultural income?explain.

  80. Paulose says:

    Receipt from sale of rubber trees … Is it agricultural Income?

  81. Ankit says:

    NO rural land is not covered within the definition of “Capital Asset” hence on its transfer profit(capital gain) arising will be exempt/non-taxable.

  82. Ankit says:

    Definitely, there will not be any tax at the time of sale of Agri. land.

    However, since the Kiran has trf. his money without any consideration to his wife hence all the income arising in future from the commercial premises purchased will be clubbed with the income of the Kiran. Please take a note of it..

  83. naren says:

    what happened if agriculture income declared in income tax but not computed with business income and tax paid as per business income

  84. S.Santhanakrishnan, Chennai says:

    Sale of Agri. Land is not Taxable provide it satisfies the following conditions:-
    a) Where the population is less than 10,000/- in the Area, the Agri.Land is situated.
    b) not situated in any notified Area.

  85. S.Santhanakrishnan, Chennai says:

    There is no tax liability on sale of Agri.Land. Application of Sale Proceeds of Non Taxable Assets is the liberty of the person and no problem do arise.

  86. Naveen Kumar JM says:

    Please remove the link for practical questions…. its old & miss leads the refering persons

  87. CA Srinath K says:

    Nice One

  88. admin says:

    Same as of Partnership slabs you can search on this website

  89. shantanu says:

    dear sandeep
    what would be tax slab for llp in business of dairy farming?
    regards
    shantanu.

  90. skranga says:

    Hi. Is there any limit specified for Agriculture Income to become tax free.

  91. lakshmaiah says:

    Hi could some one give me the slab rates on Agricultural and Non-agrecultural income.

    Thanks,
    Lakshmaiah

  92. Is it mandatory for a person who is deriving his total income from agriculture to
    a) obtain PAN
    b) file Income Tax
    c) be liable to pay tax on Interest on Bank Deposits when it exceeds Rs.10000/- p.a

    What should he do for non deduction of TDS on interest on bank deposits even if it exceeds RS.10000/- p.a.?

  93. Dharmendra Kumar Saini says:

    I sell my agriculture land.
    1- In the tahasil we paid stamp dutty on cercle rate but we received the amount on market rate. Please tell me the above amount of agriculture land from cercle rate is taxable or exempt under the income tax act.

  94. DORA says:

    please i will you to assist me on this subject:incidence of taxes among selected artisans

  95. SANT VIJAY SHUKLA says:

    i like to know how to file itr of agricultural income.

  96. Ishaan says:

    im sale my property 5 marla which is in garhshankar disst hushiarpur any one interested so plz call me on my no:9646931042

  97. bhupi patel says:

    Requesting you to please send me the answer on asap please on my e mail address:
    I have got an agricultural land & would like to give it to my friend to build his farm house at his expenses. Can I do it on lease or rent. What will be the tax implimentation on this lease or rent.

  98. debashis says:

    whether amount received from selling of farm house which is situated outside the local limist of Municipality attracts section 2 (14) i.e. is it totally exempted or not?
    In my view section 2 (14) is applicable only for agricultural land and not for farm house. Please comment and give reply urgently.

  99. p.tandon says:

    Sir,
    Remuneration clause u/s40(b) of the ITAct’1961 have been changed in FY2009-10.
    plz guide us , how we will made change/add in remuneration clause of our present p/deed as to take maximum advantage of book profit as we do not want to file a return of loss in future?

  100. sunil sharma says:

    before two years i had purchased Agricultural land and now i want to sale it with some profit as a Agricultural land. or this property situated at vilage there below 10000 population or no munciple corporation.

    pls suggest me if i will be earn some profit from this Agricultural land is this taxble or not.

  101. Bhavin says:

    In F.Y. 2010-1 I will get
    1) Net Salary-3,00,972/-
    2) Net Agriculture income- 1,10,000/- (Approx)
    3) My Investment u/s 80 will be 1,00,000/-
    4) My investment u/s 80CCF (infra structure bond) will be 20,000/-
    How much I have to pay tax? Please explain calculation.

  102. Amit T says:

    Hi,

    Is Agriculture Income by a private ltd company taxable in India?
    We want to form a private limited company for doing agriculture. Please advise.

    Thanks in advance.

  103. raj kacheria says:

    i m starting a ripening chamber where i will be purchasing raw fruits from farm and then ripen it in my chamber and then selling it
    will this activity be considered as as agriculture income in a partnership firm?

  104. KK says:

    GREAT ARTICLE BUT IT HAVE TO CHANGE NOW LIMIT IS 160000 INSTEAD OF 150000 RS MINIMUM EXEMPT SLAB

  105. kamal garg says:

    my query is
    the income from transfer of rural agriculture land included in the definition of agriculture income?

    hope i will receive ur reply as early as possible

  106. Karun Nagpal says:

    Hi,
    Please Let me Know whether following would be taxable or not?

    “Land area selected for greenhouse cultivation in Garhshankar (Hoshiarpur) falls under classification of rural land. Agricultural activities are carried out on adjacent lands also. The project envisages setting up of nursery, greenhouses and packhouse with a transit cold storage of capacity 25 MT. Land will be taken on lease for overall operation from cultivation to farm gate delivery. Post harvest management infrastructure including sorting/grading hall, quality control room, pre-cooling, cold storage, loading and unloading platform will be part of the packhouse.
    Hi-tech cultivation practices are to be adopted for raising high value vegetable crops. High value exotic vegetables such as cherry and beef tomato, colored capsicum, European cucumber and herbs will be raised and in future, other crops can also be selected according to domestic market demand and export opportunities.”

    Regards,
    Karun Nagpal

  107. Suresh Paghdar says:

    my querry is question of adding agri and non agri income arise when non agri income exceeds basic threshold limit. while calculating non agri income deduction u/s 80 to be deducted or Gross income to be considered ?

  108. s p khichi says:

    Very useful and good article sir . thnx a lot.
    S P SINGH

  109. Dr Sanjay Agarwal says:

    I am having a private limited company that is agri based and sale agriculture land on which company is making fruit orchards.Can these land be considered as agri land.

  110. Dr Sanjay Agarwal says:

    Very good article. It clears so many doubts.

  111. CA.KAMESH KUMAR says:

    Sir,
    My query is in relation to Wealth Tax Act, 1957 and is as follows :

    This query relates to application of the provisions of Wealth Tax provisions to Urban land used for Agricultural purposes :

    This Query primarily refers to taxability or otherwise of Agricultural Lands situated within Urban areas and being used extensively for Agricultural activities. In such a situation some of the Wealth Tax Officers / Assistant Commissioner of Wealth Tax / Dy. Commissioner of Wealth Tax / Commissioner of Wealth Tax / Commissioner of Wealth Tax ( Appeals ) have been consistently taking a stand that such Agricultural Lands fall with the purveiw of Wealth within the meaning of Section 2(ea) (v) – which defines Urban Land. For the sake of ready reference the provisions contained in Section 2(ea)(v) are reproduced as below :

    Weath Tax is chargeable only on the assets specified in Section 2(ea). Section 2(ea) (v) states that :

    Urban Land, being land situated in any area, within the jurisdiction of a muncipality or a cantonement board which has a population of not less than 10000; or within 8 Kilometeres from the local limits of such muncipality or a cantonement board, as the Central Government may notify.

    However, Urban Land shall not include :

    1. Land on which construction of a building is not permissible under any law or the land on which building is constructed with the approval of appropriate authority,

    2. any unused land held by the asseessee for industrial purposes for a period of two years from the date of its acquisition by him, and

    3. any land held by the asseessee as stock in trade for a period of ten years from the date of its acquisition by him;

    It may be noted here that Construction of buildings on Agricultural Lands except for a single unit of Farm House less than 500 Sq. metres is not permissible under the local laws of each state,

    Further the section itself is using the term ” Urban Land “, which does not signify Agricultural Lands.

    Also request your goodself to kindly throw light in veiw of : CIT v. Siddarth J. Desai (1983) 139 ITR 628 (Guj), CIT v. Manilal Somnath (1977) 106 ITR 917 (Guj).

    And Chennai High Court Judgement in the case of CWT Vs. E.Udayakumar ( 2006 ) 284 ITR 511 ( Mad ), Tara Singh vs. DCWT ( 2006 ) 97 ITD 482 ( Amritsar Trib ), Charan Paul Singh Mann & Jagra Singh Mann Vs. ACWT ( Chandigarh Tribunal ) and ITAT Hyderabad Bench in the case of Penzal Investment & Trading Co. (P) Ltd. v. Assistant CWT (2000) 75 ITD 39 (Hyd-Trib). In this case the Hyderabad Tribunal relied upon / cited various land mark judgements while discussing the issue regards taxability of Agricultural Lands situated in Urban areas and used for Agricultural purposes.

    Needless to say I would be either in touch with you over Telephone or met you in person as regards Consultancy Charges are concerned, or I would request you to kindly send a e-mail in this regards.

    Request your goodself to kindly mail the opinion on the e-mail address given below.

    Regards,

    CA.KAMESH KUMAR.
    CHARTERED ACCOUNTANT.
    KRISHNA RAO AND COMPANY,
    CHARTERED ACCOUNTANTS,
    AURANGABAD.431001.
    TEL.NO.(OFF) 0240-2337153/2323353
    TEL.NO.(RES) 0240-2338922
    MOB.NO.+919822774427.
    email : [email protected]; [email protected]

  112. kiran says:

    hello
    my mother had made a will to give the revenue generated by selling the agricultural land to me. i got around 18 L. the land is agricultural. in rural area.
    this amt i intended to give it to my wife and transferred from my account to her account.
    she took a commercial premise on that money.
    pl let me know about the tax.
    thank you.

  113. CA Sandeep Kanoi says:

    It will be exempt.

  114. Pushkaraj says:

    I wish to know weather agricultural income made from non agricultural land will be treated as non taxable agricultural income?

  115. Rajesh Shetty says:

    Sale of agriculatural land taxable or not.

  116. Vijay Kumar says:

    The author has not shed light on the applicabillty of section 14A read with Rule 8D in respect of income claimed to be agricultural income by any persons having different sources of income, including agricultural income

  117. CA Sandeep Kanoi says:

    Partnership have lesser legal hassles then limited company. Its better to go for LLP or partnership instead of company.

  118. Kamlesh Patel says:

    Sandeep,

    Thankk you for prompt response. I had one more question.
    Would it be better to trade as limited Company or as a Partnersheep. If Partnersheep, is it permited to set up a LLP (Limited Liability Partnersheep) for a Dairy farm? Also, are there any tax advantages with LLP?
    Regards

    Kamlesh Patel
    Gujarat

  119. CA Sandeep Kanoi says:

    Yes. As profit of companies if taxable @ 30% irrespective of profit amount and Turnover.

  120. Kamlesh Patel says:

    Great article.

    Is it correct that the dairy farm business is not tax exempt even though it only sells raw milk (i.e not processed in any way) to Amul.

    If we register it as Limited Company, would it mean we’ll have to pay 30% tax?

    We only have 100 cows, so we’re not a big business.

    I would be very greatful for you response. I look forward to hear from you.

    Regards

    Kamlesh Patel
    From Gujarat

  121. Srinivas,Hyderabad says:

    Our’s is the Agri based company,We have taken Agriculture land on lease for carrying our agricultural research from a local farmer.
    My question is weather we can deduct TDS to the farmer u/s194(I).
    please reply

  122. Amarjit Singh says:

    Hello,
    Good article.As i am applying for an F1-Visa.How can i show income proof?My father is a farmer and he is not the owner of the whole lands.

    Thanks

  123. Thanks for the comment we have included the same in our article.

  124. sivadas chettoor says:

    Good article. You could have mentioned about Raja Benoy Kumar Sahas Roy’s case which is regarded as a locus classiccus.
    sivadas chettoor CA

Leave a Reply