Agricultural Income

Q. Define Agricultural Income [4 marks - 2022]

Q. What is Agricultural Income? Define it with scheme of partial Integration of Agricultural Income. [20 marks - 2022]

Q. What is agricultural income? What are its kinds? What are the limits of such income from income tax? [20 marks - 2028]

Q. Define Agricultural Income [4 marks - 2026]

Q. What is ‘Agricultural Income’? What are its kinds? Explain. [10 marks - 2016]

Agricultural Income

Section 2 (1A) of the Income Tax Act states the definition of agricultural income includes 

1. Renting/leasing agricultural land for agriculture, storeroom, residential place and outhouse.

2. Money earned from trees growing in nurseries as seedlings or saplings.

3. Renting/leasing agricultural land by cultivator or farmer.

4. Any income due to commercial use of agricultural land.

Following incomes are excluded: 

1. Revenue generated from the sale of processed produce without actual agricultural activity.

2. Income earned from externally processed produce.

3. Revenue derived from trees sold as timber.

Partial Integration of Agricultural Income

Agricultural Income is exempt from tax under section 10(1) subject to conditions mentioned in the definition clause of section 2(1A) of the Income Tax Act, 1961. However, the state government can levy tax on agricultural income if the amount exceeds Rs.5,000 per year. This method is called as partial integration of agricultural income with non-agricultural income.  The purpose behind this method is to tax non-agricultural income at higher rates of tax.

Types of Agricultural Income

As per the Income Tax Act, there are agricultural income 

1. Agricultural land: The income generated from farming activities such as growing crops, fruits, vegetables, and other agricultural products. The purview of this category includes income from selling livestock, dairy products, and poultry.

2. Agricultural business: This category includes profits generated from agricultural processing and manufacturing activities like sugar, textiles, jute, and other agricultural products.

3. Agricultural rent: The rental income derived by the owner from renting out the land to farmers for cultivation purposes.