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Taxability of Agriculture Income

What is Agriculture Income

Ans. As per Section 2(1A) agricultural income means:-

  • Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
  • Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
  • Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).
  • Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income

TAXABILITY

To Calculate Income Tax on Gross Total Income that contains Agriculture income, we have to follow these 3 steps: –

  • STEP 1: – First add up your Non Agriculture Income and your Agriculture Income and then Calculate Tax on it at the normal rate.
  • STEP 2: – Secondly, Add up your Basic Exemption limit with your agriculture Income and then calculate tax at normal rate.
  • STEP 3: – Now deduct STEP 2 from STEP 1

Resultant will be your Tax and afterwards deduct rebate, if any and add cess on it.

EXAMPLE:-

Mr. A has earned Income from Business Rs. 5,60,000/- and his rental income from land used as agriculture purpose in india is Rs. 4,50,000/- . His age is 65 years. Calculate his Income Tax?

Ans. 

STEP 1. :- Add Agriculture Income and Non Agriculture Income

Agriculture Income                                Rs. 4,50,000

Non Agriculture Income                           Rs. 5,60,000

TOTAL                                                Rs. 10,10,000

                              TAX (excl. cess)                              Rs. 1,23,000

 

STEP 2. :- Add Basic Exemption and Agriculture Income

 

Basic Exemption                                         Rs. 3,00,000

Agriculture Income                                    Rs. 4,50,000

TOTAL                                                   Rs. 7,50,000

                              TAX (excl. cess)                                 Rs. 70,000

 

STEP 3. :- Deduct Step 1 from Step 2

TAX = STEP1 – STEP 2 = Rs. 1,23,000 – Rs. 70,000 = Rs. 53,000/-

Add: Cess @ 3%                                                                        Rs. 1,590

TOTAL TAX = Rs. 54,590 /-

Taxability of Agriculture Income

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