Whether Agriculture income is taxable

Hi

Agriculture Incom is free under IT act.

If you have only agricultural income, then the income is not taxable. It is fully exempt.But If you have agricultural income and other sources of income, then you are required to file the returns and show the agricultural income. Even if the total income is below the taxable income.

However there are certain income under sec 10 , wherein agriculture income is considered to determine tax on non agriculture income.

Normally Govt. Servants are barred from any other work which is revenue earning in nature.  If I do, can I have problem later.

There is no such rule that restricts Government employee to hold agricultural land, however Maharashtra rules do not allow farmland to be sold to non agriculturist. Remember Amitabh Bachchan's controversy 

There is no rule barring Government Servants owning Agriculural land and earning income from the same. However, taking land on lease and performing agricultural activities may not be allowed.

Agricultural income per say is exempt from income tax, however in the method of computation of tax, the agricultural income is clubbed to the other taxable income and relied is allowed subsequently, thus effectively agricultural income becomes taxable though at slightly lower rate if you have taxable income from other sources and fall in higher tax bracket.

Income from Agriculture is exempted in Income Tax Act.

Dear All,

It is  misconception and / or improper to say that   "Agricultural Income" is Tax free.

1.  To claim total tax exemption under the head  "Agriculture Income", 
a) THE PERSON HAS TO BE A  "ANCESTRAL  & CHRONIC  FARMER"     
" A N D "  
b)  most importantly he  " MUST  OWN  "  agricultural land in his own name. 
c)  An  I.T.O. has discretionary powers to allow  exemption under "agricultural income" and can   disallow  any income  which is not proportinate vis-a-vis to the Land Holding area and the agriculture Income capacity claimed thereon.
d)  If a person  cannot   produce  "7 X 12"  land record extract  in his own name,  then all income claimed as  "agriculture income"  will be disallowed and will be taxed as regular income-from-other-sources"
e)  A person owning "non-agriculture land or say NA land"    BUT doing  farming or agriculture work and claiming agriculture income IS ALSO NOT ALLOWED TO CLAIM TAX EXEMPTION under agriculture head.

2.  If a person in not a  "Ancestral Farmer",    and does not actually  "O W N"   agricultural land in his own name,  THEN
a)  HE CANNOT CLAIM  "TAX EXEMPTION"  under the  head of  "Agriculture Income",  
EVEN IF
b)  he cultivates & earns from somebody elses land.
c)  he is not entitled to any subsidy or benefits announced by the Govt.
d)  Non-Farmer category  taking over "agriculture land"   "ON LEASE",  are "not entitled" to any tax exemption under the agriculture income head.
HOWEVER
e)  A  "actual" farmer  BUT a non-land owner (who might have sold off his entire land holding)  can claim "agriculture income"  by farming on another farmers land,  BUT ONLY FOR A PERIOD OF 12 YEARS,  after that he loses his  "farmer" status, unless he again buys  "agricultural land" in his own name, within the period.

3.  For e.g.
a)  There are Corporates who own  "agricultural land".
b)  A corporate cannot be classified as a  "Farmer",  since it is a non-human being.
c)  All   "agricultural income"    WHATSOEVER,  from the Corporate owned land, is taxed as "Business Income"  and not exempted as "agriculture income".
d)   Corporate Land owners are not entitled to  any subsidy or benefits announced by the Govt.
e)   "Agricultural Income"  cannot be claimed if generated out of  "NA" land.

4.  There is   ABSOLUTELY  "no bar"  on any Govt. servant or Public servant or  HIV+ Minister or beggar or leper to  own "agriculture land"  and  do ADDITIONAL agriculture work and earn income out of it, subject to above parameters.
(AS IT IS, 90% OF OUR POLITICAL LEADERS ARE FARMERS)

5.  OF COURSE, to the interested people, there are official ways or becoming a "professional farmer"  and purchase  "agriculture land"    (even in Maharashtra)  and do farming  AND  "ONLY"  THEN  claim tax exemption under the agriculture income head.

Keep Smiling .... Hemant Agarwal
 

The views expressed by Hemantji would be a darling for the Income Tax Officer but, I wonder they are entirely misplaced.

There is nothing sort of "Chronic or Ancestoral Farmer" defined for IncomeTax Purposes. In fact it is the Agricultural Income which is exempt not the person who is earning the same. Any person be it Individual, Firm, Company or any other PERSON for IT purposes earning Agricultural income from a land being used for agricultural purposes as defined in section 2(1A), may claim exemption for such income. There are various companies who are earning agricultural income on even leased lands by indulging in Horticulture, Floriculture and other such mass production commercial agricultural activities and their income is exempt from income tax.

The person need not be the owner of land on which agricultural activity is performed. It can be a tenant, leaseholder or any other arrangement which can be proved with evidence.

The person claiming to earn agricultural income need not be cultivating himself and may employ labourers to perform cultivation activities. To sum up he should be able to prove that he is benefitial owner of such agricyultural produce or incidental income including rent being earned from the land being used for agricultural purposes.

Further, there is no bar or restriction on agricultural activities being performed on NA land if the same is not an Urban Land (i.e. not falling within jurisdiction of Municipality, cantonment or within eith Kms from boundary of such Municipality etc). For a land which is assessed to Land Revenue (ie yet not converted to NA) and even falling well in heart of city, agriculutural income can still be earned and claimed as exempt.

I wish to supplement a bit. Agricultural income is generally exempt from tax. The conditions are that you must have done agricultural operations as laid doen by the Hon Supreme Court in Raja Benoy Kumar Sahs Roy's Case.The land must be situated in India and used for agri purposes. It is not necessary that the land should be owned by you. Even  agri income from  lands taken on lease shall be eligible as law did not lay down the condition of ownership.

But you will have to see whether lease of land for agri purposes are permitted under the state law. For Eg in Kerala lease of agri. land is not permitted (except when it exceeds 30 acres).But according to me this will not affect the nature of income being agri and you will be eligible for exemption. It may be noted that Income tax law is not concerned with the way in which you earn the income. Law looks into the accomblished facts. Nothing more. Even income tainted with illegality is liable for taxation and this matter is well settled. If you are having only agri income you need not file returns. But if your non agri income exceeds the taxable limit you will have to. If non agri income exceeds the said limit then agri income is to be clubbed  for the purpose of fixing the rate of tax. In that sense tax is imposed indirectly on agri income. This clubbing has been upheld by the Hon' Supreme court.

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