AGRICULTURAL INCOME

Agriculture income is exempt under the Indian Income Tax Act. This means that income earned from agricultural operations is not taxed. The reason for exemption of agriculture 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

Sources of agricultural Income As per Income Tax Act income earned from any of the under given three sources mean Agricultural Income; (i) Any rent received from land which is used for agricultural purpose. (ii) Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce. (iii) Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc.

Tests to Determine Agricultural Income Income derived from land Land is used for agricultural purposes Land is situated in India

Agricultural incomes (a) Income from sale of replanted tree (b) Income from growing flowers and creepers. (c) Share of profit of a partner from a firm engaged in agricultural operations. (d) Interest on capital received by a partner from a firm engaged in agricultural operations. (e) Income derived from sale of seeds. (f) sale of standing crop by a cultivator (g) grazing fees realised from piece of land used for grazing of animals used for agricultural purposes

Non -Agricultural Income Income from: Land used for potteries and bricks Land used as stone queries Fisheries and ferries Supply of water even for agriculture storage of crops/timber Mining royalties Animal husbandary(Dairy and poultry farmimg)

Certain income which is not treated as Agricultural 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 is not agriculture income.

Partly agricultural and partly non agricultural income cropruleAgricultural income Non agricultural income Growing and manufacture of tea 860%40% Rubber manufacturing business 7A65%35% Coffee grown and cured by seller 7B(I)75%25% Coffee grown, cured, roasted and grounded by the seller in India with or without mixing any flavouring ingredients 7B(IA)60%40%

Assessment of Agricultural income w ith effect from A.Y , the agricultural income is integrated with non agricultural income in certain cases of assesses. The integration is done only when the assessee has both agricultural and non agricultural incomes Non agricultural income of the assessee is the computed total income of the assess as per the provisions of the Income Tax Act

Computation of Agricultural income Important Points Any sum paid by the person on account of any tax levied by State Government on agriculture will be allowed as deduction Loss incurred in agriculture will be allowed to be setoff only against gains from agriculture Where the net result of agricultural income from various sources is loss, the loss will be disregarded and net agricultural income will be taken as nil.

When to Integrate Integration is done only in case of (i) individuals (ii) HUF (iii) AOP (iv) BOI and (v) artificial juridical person Integration is done only when the non agricultural income exceeds the basic exemption limit in the relevant previous year Integration is done only if the net agricultural income of all the above persons exceeds Rs 5000 p.a in the relevant previous year.

When not to integrate Integration is not done in case of (i) firms (ii) companies (iii) cooperative societies and (iv) local authorities No integration if the net agricultural income does not exceed Rs 5000 in the relevant PY

How to integrate If all the above mentioned conditions are satisfied, the agricultural income is added with the non agricultural income Tax is calculated on the total at current rates of interest Net agricultural income is added with the basic exemption limit Tax is calculated on this total at current rates of interest Tax calculated in point fourth is deducted out of the tax calculated in point second Add education and higher education cess at 4% on the total amount of tax Total is tax payable Tax payable is rounded off to nearest multiple of Rs 10

Income Tax Rate AY | FY – Individuals less than 60 years Txable incomeTax Rate sNil Rs. 2,50,000 to Rs. 5,00,000 5 % Rs. 5,00,000 to Rs. 10,00,000 20% Above Rs. 10,00,00030%

Individuals betwen 60 years and 80 years Taxable incomeTax Rate Up to Rs. 3,00,000Nil Rs. 3,00,000 to Rs. 5,00,0005% Rs. 5,00,000 to Rs. 10,00,00020% Above Rs. 10,00,00030%

Individual above 80 years Taxable incomeTax Rate Up to Rs. 5,00,000Nil Rs. 5,00,000 – Rs. 10,00,000 20% Above Rs. 10,00,00030%

Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore. Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore. Health & Education Cess: 4% of Income Tax.

Eligibility to Claim Rebate Under Section 87A FY (AY ) You can claim tax rebate under this provision if you meet the following conditions: You must be a RESIDENT INDIVIDUAL; and Your Total Income after Deductions (under Section 80) doesn’t exceed Rs 3.5 lakh. The rebate is limited to Rs This means that if the total tax payable is lower than Rs 2500, then that amount will be the rebate under section 87A. This rebate is applied to the total tax before adding the Education Cess (4%). Following are a few examples of the 87A rebate allowed to Resident Individuals including Senior Citizens: