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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Agriculture income tax is levied on earnings derived from agricultural activities. These include numerous sources of income from farming land to commercial produce from horticultural land.
Agriculture, alongside its allied sectors, exists as one of the largest sources of livelihood in India. Figures ascertained by the Food and Agriculture Organization (FAO) indicate that agriculture still serves as a primary source of income for about 70% of Indian rural households. The government, therefore, endeavors to boost this sector by means of schemes, policies, and tax exemptions for agricultural income.
Agricultural income refers to the income earned or revenue generated from sources premised on agricultural activities. These sources of income include farming land, buildings on or identified with agricultural land, and commercial produce from horticultural land.
Section 2(1A) of the Income Tax Act, 1961, lays down the definition of ‘agricultural income’ under the following three activities:\
Categorizing a particular amount earned as agricultural income takes into account several other factors, such as:
Understanding the types of agricultural income is crucial for farmers, policymakers, and tax authorities alike. Agriculture income includes:
However, not all income-generating agricultural activities fall under the category of agricultural income. The following are instances of non-agricultural income:
Under Section 10(1) of the ITA, 1961, agricultural income is exempt from taxation. This exemption implies that the Central Government does not impose or levy any tax on agricultural income.
However, agricultural income tax persists at the state level. The legislature uses a method called partial integration of agricultural income with non-agricultural income to tax such earnings. This method is applicable when an individual meets the conditions mentioned below:
A taxpayer aged 50 earns ₹3,00,000 in agricultural income and ₹5,00,000 in non-agricultural income. Consequently, the computation of her agricultural income tax for the financial year unfolds as follows:
Assessing tax on non-agricultural income plus net agricultural income, totaling ₹8,00,000 (₹3,00,000 + ₹5,00,000):
Hence, the total tax on non-agricultural income plus net agricultural income is ₹72,500. (1)
Calculation of tax on net agricultural income plus maximum exemption limit as per slab rates, amounting to ₹5,50,000 (₹3,00,000 + ₹2,50,000):
Therefore, the total tax here stands at ₹22,500. (2)
The final tax is calculated as the difference between the figures derived in Step (1) and Step (2). The difference, ₹50,000 (₹72,500 – ₹22,500), represents the final tax.
Adding the Health and Education cess at 4%, which amounts to ₹2000, her total tax liability amounts to ₹52,000.
Understanding agriculture income tax and the various types of agriculture income is essential for farmers and policymakers. As agriculture remains an important sector of revenue for many economies, the taxation framework around it is designed to strike a balance between providing support to farmers and ensuring financial responsibility.
Farmers should engage with financial experts or tax professionals to navigate the complexities of agriculture income tax and make informed decisions in alignment with their financial goals.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
