Agriculture income is exempt under section 10(1) of the Indian Income Tax Act but While computing tax on non-agricultural income agricultural income is also taken into consideration and when we compute tax taking agriculture income into consideration we pay tax on agriculture income also.
Agricultural Income – Tax treatment / Taxability– Tax on Agricultural Income In India is computed as follows:-
Step 1: Add non-agricultural income with net agricultural income.
Step 2: Compute Tax on Step 1 (not including Cess)
Step 3: Add net agricultural income and the maximum exemption limit available to the assessee.
Step 4: Compute tax on Step 3. (not including Cess)
Step 5: Compute Net Tax Payable ( Step 2 – Step 4)
Step 6: The sum so arrived at shall be increased by education cess @4% Health and Education cess.
This can be illustrated as follows:-
An assesse has his taxable income of Rs. 480000 and agriculture income of Rs. 50000.
Tax on his income will be computed as follows:-
Ø Total income = Rs 530000
Ø Tax =(250000*5%) + (30000*20%)
Tax = 12500+6000= Rs 18500
Ø Basic exemption limit+ agriculture income =250000+50000 =3,00,000
Ø Tax thereon = Rs 50000*5%= Rs 2500
Ø Net tax to be paid = 18500-2500= Rs.16000
Now if we compute tax on only on Rs 480000 it would be Rs. 11500
Therefore the increased tax liability of Rs 4500 (16000-11500) is nothing but tax on agriculture income.
Therefore it can be said that agriculture income is not really exempt. The tax is levied in indirect way and this concept is known as partial integration of taxes.
It is applicable to individuals, HUF, unregistered firms, AOP, BOI and artificial persons. Two conditions which need to satisfy for partial integration are:
i. The net agricultural income should exceed Rs. 5,000 p.a., and
ii. Non-agricultural income should exceed the maximum amount not chargeable to tax.
For any query or doubt or mistake in the article you can contact me on my email id camohittaneja13@gmail.com.
Also Read:
Mere holding of Agricultural land not proves earning of agriculture income
Taxation of Agricultural Income- Detailed Analysis
(Republished With Amendments)
This is a clever way invented by the genius Mr.P.Chidambaram.
Tax on Agricultural Income is a State subject under the Constitution.
Is it correct to Tax the same income again even if theway is dubious?
This is a clear way that was invented by the genius Mr.Chidambaram to Tax Agricultural Income.
I wish to point out that Tax on Agricultural Income is a State Subject under the Constitution.
I wonder whether it is correct to tax the same twice in whatever indirect manner also ?
Dear sir
my question is my non agriculture income Rs. 250000 and agricultur income is Rs . 200000 in this case mandatory showing agricultur income in ITR or NOT
pls clarify as per act
Dear Sir,
I am curios to understand which section this, partial integration, falls under as per the Act. It would be nice if you could provide details of this.
Dear Sir,
It would be nice if you could provide the Section under which partial integration is given under the Act.
Why the Sec 14A does not apply on Agriculture Income i.e. why the expenses on agriculture income is allowed and deducted from agriculture income as it is an exempt income U/s 10(1).
How the I. tax is calculated on agricultural income if it is more than Rs.5000/- and non agricultural income does not exceed the maximum amount not chargeable to tax.
I have taken an agricultural land on rent for the purpose of cultivation, will the income derived from this land be taxable or non-taxable becos the ownership does not lie with me. Its purely rental land. pls advice.
hi sir , please tell me what tax exemption can i have in agriculture income , because i get around 10 lakhs of agricultural income per annum
DEAR SIR
I HAVE AVERAGE INCOME IN AGRICULTRE RS- 6,00,000/- SO PLEASE CLARIFY ME IN THIS INCOME I AM LIABLE TO PAY TAX OR NOT AND I HAVE NOT ANY OTHER INCOME
Good one….it means Agriculture income alongwith any other income, increases tax liability….and hence, agri-income is not actually tax-free always…
Thanks, Mohit.
Now, I am cleared about Agri/Income’s Tax Liability.
Good One….