Income Tax Taxability/Treatment of Agriculture Income
67INCOME TAX TREATMENT ON AGRICULTURE INCOME
Agriculture income is free from income tax as per income tax act in India. It means income earned from agriculture operation such as the income from output of the grains is free of income tax. The reason for exclusion of income tax is to free the farmers from this tax. But the agriculture income should be taken to consideration while computing income from non-agriculture.
What is agriculture income?
The following should be trated as agriculture income
1-Any rent received on agriculture land:-Rent received on agriculture land is include in agriculture income hence it is tax exempted. There must be a direct link between the agricultural land and the receipt of income by way of rent or other revenue.
2-Income from agriculture operations:- Any income come from agriculture operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce.
3-Income from Farm House:- Income from farm house also considered agriculture income subject to that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc.
4-Income from Nursery operation:- Income from nursery operations also considered agriculture income and it is also exempted from income tax act in India.
Some points should keep in mind while computing agriculture income:-
1- There must be a land.
2- The land should be used for agriculture.
3- Land cultivation is necessary.
4- If rent is received on land, the land should be used in agriculture operations only.
5- If the income derived from farm house, the building of the farm house should be situated on that land only.
6- Ownership:-The ownership is not necessary while computing income from agriculture as the assesse can be tenant or sub-tenant.
These includes in agriculture income.
1- Sale of replanted tress.
2- Sale of flowers & seeds.
3- Rent received on agriculture land.
These doesn’t includes in agriculture income.
1- Poultry farming.
2- Bee hiving.
3- Dairy farming.
4- Sale of spontaneously grown trees.
5- Purchase of ready crop.
6- Income from producing the salt on land with sea water.
7- Royalty from mines.
8- Butter and cheese making.
9- In the absence of ownership or leasehold rights, income from plantation companies is either considered interest or non-agricultural income chargeable to tax
10- Rent of agriculture land or farm house for non agriculture purpose like shooting of films etc
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Comments
Tax on Sale of agricultural land:- Before 1970, profit on the sale or transfer of all agricultural land was considered rent or revenue derived from the land. Such profit was, therefore, tax-exempt as agricultural income. There were several favourable judgments of various High Courts on the issue. However, via a retrospective amendment that took effect from April 1, 1970, agricultural land situated in an urban area or within a distance of 8 kilometers from notified municipal or cantonment board areas is to considered a capital asset. Profit on the sale of such land is, therefore, not deemed agricultural income, but is considered capital gain liable to tax. Agricultural land situated in rural areas would, on the other hand, be outside the purview of this definition. Profits on the sale or transfer of such land would, therefore, be consideredtax-exempt rent or revenue derived from agricultural land.
FREEWORKING says:
3 weeks ago
Exceptions: – If a person just sells processed produce without actually carrying out any agricultural or processing operations, the income would not be regarded asagricultural income. Likewise, in cases where the produce is subjected to substantial processing that changes the very character of the product (for instance, canning of fruits), the entire operations cannot be regarded as agricultural operations. The profit from the sale of such processed products would have to be apportioned betweenagricultural income and business income. Further, the income from trees that have been cut and sold as timber is not considered agricultural income since there is no active involvement in operations like cultivation and soil treatment.