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Income from Agriculture – Taxable or Exempted

eFiling Portal Team Friday, May 26, 2017

DEFINITIONS

Agricultural income is defined under section 2(1A) of the income tax Act...any rent or revenue derived from land which is situated in India and is used for agricultural purposes. This means that income earned from agricultural operations is not taxed.

Income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Income attributable to a farm house - used as a dwelling house, store house etc.

AGRICULTURAL INCOME

  • The profit received from agricultural produce or activities
  • Rent or lease of a land that is used for agricultural purposes.
  • The commercial sale of produce gained from an agricultural land
  • The renting or leasing of building in and around the agricultural land.
  • Income obtained from the sale of seeds.
  • Sale of growing creepers and flowers.
  • Selling of Plants and flowers
  • Sale of replanted trees

NON AGRICULTURAL INCOME

  • Income from poultry farming
  • Profit from dairy farming
  • Income from butter and cheese making
  • Purchase of standing crop
  • Income from bee hiving
  • Income from poultry farming
  • Royalty income from mines
  • Producing salt by flooding the land with sea water

POINTS TO BE NOTED

Agricultural income considered for rate purpose while computing tax of individual /HUF/AOP/BOI/Artificial judicial Person.

Losses from agricultural operations could be carried forward and set off with agricultural income of next eight assessment years.

Agricultural income is computed same as business income.

EXCEPTIONS

If a person sells processed produce without carrying out any agricultural or processing operations.

Likewise, in case where the produce is subjected to substantial processing which changes the very nature of the product, the entire operation is not considered as an agricultural operation.

The profit from the sale of such processed products will have to be apportioned between agricultural income and business income.

Income from trees that have been cut and sold as timber is not consider as an agricultural income.

SECTION 54B

Relief to a taxpayer who sells his agricultural land and acquires another agricultural land from the sale proceeds.

The assessee must be an individual or a HUF

The agricultural land should used for agricultural purposes. It may be a long term asset or a short term asset

It must be used either by the assessee or his parents for agricultural purposes in at least two years immediately preceding the data on which the transfer of land took place

The assessee should have purchased another land, which is being used for agricultural purposes, within a period of two years from the date of sale.

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