Most of the people of India are engaged in Agriculural activities. About 70% of people are engaged in agriculture and derives income from it. However, the Government of India levy certain percentage on incomes known as Tax. That means any income are subjected to tax. The Direct Tax regime in India is guided by the Income Tax Act, 1961. There are certain exception to taxation on incomes. All incomes are not taxable, exceptions in the form of Exemption, Deduction,etc., are provided by the Government. Now the question arises whether Agricultural Income is taxable or not. The answer is ‘NO’. Agricultural Income is exempted from tax under Section 10(1) of the Act.
List I- Only Union Government makes law
LIST II-Only State Government make law
LIST III- Both Union and State Government are entitled to make laws concurrently.
The Agricultural Income is a part of Direct Taxes and are levied by State Government i.e. it comes under LIST II as Constitution empowers only State Government to levy taxes on agricultural incomes.
i) any income received as rent or as revenue by the owner, by giving the right to use the land for cultivation.
ii) any income earned from land, situated in India, by applying agricultural operations such as ploughing, sowing, harvesting, pruning etc,.
iii) any income by sale of agricultural produce raised by owner or received as rent-in-kind.
iv)if any process is employed by the cultivator or owner who receives produce as rent-in-kind,any income receive is agricultural income
v) any income from building used for agricultural operations. However,
a) building should be in the vicinity of he land
b) building should be used as store house or dwelling house by the cultivator or the receiver of rent-in-kind
(1) Income from sale of trees which were not grown with some aid or subsequent operation are not carried out. They are of spontaneous growth.
(2) Income from sale of wild grass
(3) Income from sale of gur or redefined sugar obtained through a manufacturing process.
(4) Income from sale of grinned cotton
(5) Interest received by money-lenders by way of agricultural produce.
(6) Remuneration for managing agricultural farm/property.
(7) Share received for supply of water as agricultural produce.
(8) Sale of fruits of trees which are of spontaneous growth.
(9) Income from fisheries.
(10) Royalty income from mine and brick making.
(11) Interest on arrear rent of agricultural land.
(12) Commission received for selling of agricultural produce of the tenants by the owner.
RULE 7- This is the general Rule applicable for all except Tea,Coffee and Rubber. As per this Rule, market value of the agricultural produce will be deducted from total income to get non-agricultural income. While the difference between market value of such produce and cost of cultivation is agricultural income.