Agriculture is said to be the primary occupation in India. It is usually the only source of income for the large rural population in India. The country as a whole is entirely dependent on agriculture for its basic food requirements. The government has numerous amount of schemes, policies and other measures to promote growth in this sector – one of them being an exemption from income tax.

The Income-tax Act has its own definition of agricultural income which constitutes the following 3 main activities:

I. Rent or revenue earned from agricultural land situated in India:


II.Income from agricultural land in the following ways:


Agriculture: The meaning of agriculture though not covered in the Act, has been laid down by the Supreme Court in the case CIT v. Raja Benoy Kumar Sahas Roy where agriculture has been explained to consist of two types of operations –basic operations and subsequent operations.
The basic operations would include cultivation of the land and consequently tilling of the land, sowing of seeds, planting and all such operations that require the human skill and effort directly on the land itself.
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.
Through the performance of a process by the cultivator or the receiver of rent (in-kind) that results in the agricultural produce being fit to be taken to the market: Such processes involve manual or mechanical operations that are ordinarily employed to make the agricultural produce fit for the market and the original character of such produce is retained.
Through the 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.

The conditions for classifying income derived from farm building as agricultural income are as follows:

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.

Income from the sale of seeds.
Income from the sale of replanted trees.
Interest on capital received by a partner from a firm engaged in agricultural operations.
Income from growing flowers and creepers.
Rent received for agricultural land.
Profits received by a partner from a firm involved in agrarian produce or activities.

There is a complete tax rebate on agriculture income in these cases

But, in case, your agricultural income exceeds Rs. 5,000 and you have other sources of income too, then the tax liability for that year is to be calculated as:

Get all your business related solutions under one roof. Taxation, Accounting, Management. You name it, and we have got you covered. Moreover, you will never have to physically meet us as all of our services are carried out online. Get things done quickly with a few clicks and minimum time. From our website to our process everything is designed keeping your convenience as our priority. Our utterly digital process makes your experience smoother and faster.

FINNTAXES.COM provides the finance and taxation services for your business at very minimal prices.

Go Paperless with FINNTAXES.COM and email us - financeandtaxes@yahoo.com