AGRICULTURAL INCOME
The meaning of the term agricultural
income can be explained with the help of the following:
1. A. Any report or revenue derived from
land,
B. Which is situated in India and
C. Is used for agricultural purpose
2. A. Any income derived from such land
by agricultural operations or
B. Any process by cultivator or receiver of rent-in-kind, which readers
the produce fit for the market or
C. The sale of such produce.
3. Any income from a farm house.
NOTE: Capital gains arising from the transfer of agricultural land shall
not be treated as agricultural income.
If the following conditions are satisfied the income from land is treated
as agricultural income.
1. The land must be situated in India.
If the land is situated outside India, the income from such land will not be
treated as agricultural income.
2. Land must be used for agricultural
purposes. It means, tilling of the land, watering it, sowing of the seeds,
planting and similar operations on the land must be carried out by the
assessee.
3. The receiver of income from land must
have interest in the land. The landlord or tenant or usufructuary mortgagee of
the land has interest in the land.
4. The direct income from agricultural
is treated as agricultural income. An indirect income from agriculture is not
agricultural income. For example, salary of a farm manager or dividend from a
company engaged in agricultural activities is not agricultural income.
Kinds of
Agricultural Income
1. Rent or revenue derived from land:
When one person grants to another right to use his land for agricultural
purpose, the former receives from the latter rent or revenue (in cash or kind)
in consideration of such user. Such rent or revenue is treated as agricultural
income.
2. Income from agricultural operations:
It means cultivation of a field, tilling of the land watering it, sowing of the
seeds, planting and similar operations on the land.
Products which grow wild on the land or are of spontaneous growth not
involving any human labour or skill upon the land are not products of
agriculture. The income derived there from is not agricultural income.
3. Income from making produce fit for
market: If there is no market of the produce of the field and the cultivator or
receiver of rent-in-kind performs any activity to make the produce of the field
and the cultivator or receiver of rent-in-kind performs any activity to make
the produce fit for market, any income from such activity is also agricultural
income. The process employed in curing of coffee, flue curing of tobacco,
ginning of cotton, etc., is such a process.
4. Income from sale of produce: Income
derived by a cultivator or receiver or rent-in-kind from the sale of produce
raised or received by him is treated as agricultural income, even if he keeps a
shop for the sale of such produce.
5. Income from a farm house: The income
from a farm house is treated as agricultural income if the following conditions
are satisfied:
A. The building is owned and occupied by
the cultivator or receiver of the rent or revenue of any such land;
B. It is situated on or in the immediate
vicinity of the agricultural land;
C. The building is, by reason of his
connection with the land, used as dwelling house or a store-house or an
out-house by the cultivator or receiver of rent-in-kind;
D. The land is situated in urban area
and is either assessed to land revenue in India or is subject to a local tax
assessed and collected by the officers of the government.
If the land revenue or local tax is
not payable on such land:
1. The land is situated in ‘non-urban’
area; or
2. The land is situated within
municipality or cantonment board jurisdiction, has a population of less than
10000; or
3. The farm building is not situated
within the area specified below, the income derived from such building shall be
agricultural income:
The land is not situated in any
area within the distance, measured aerially;
A. Not being more than two kilometres
from the local limits and which has a population of more than ten thousand but
not exceeding one lakh; or
B. Not more than six kilometres from the
local limits and which has a population of more than one lakh but not exceeding
ten lakh; or
C. Not being more than eight kilometres
from the local limits and which has a population more than ten lakh.
6. Income from saplings or seeding; the
income derived from sapling or seedling grown in a nursery shall be deemed to
be agricultural income.
Important Points Regarding Computation of Agricultural Income
2. Agricultural Income from Agricultural
building is computed as if it were income chargeable to income tax under the head ‘Income from House property’.
3. Any other agricultural income is
computed as if it were income chargeable to income tax under the head ‘Profits
and Gains of Business or Profession’.
4. Any sum payable by the assessee on
account of any tax levied by the State Government on the agricultural income
shall be deducted in computing the agricultural income.
5. Where in respect of any source of
agricultural income there is a loss, such loss shall be set-off against any
other source of agricultural income.
6. Where the assessee is a member of an
association of persons or body of individuals and his share in the agricultural
income of the association or body is a loss, such loss shall not be set-off
against any other agricultural income of the assessee.
7. If there is loss from agriculture, it
can be carried forward and set-off against agricultural income in the following
eight years provided the return of income has been filed and such loss has been
determined by the Assessing Officer.
8. Where the net result of the
computation made in accordance with these rules is a loss, the loss so computed
is ignored and the net-agricultural income is deemed to be nil.
9. The net agricultural income is
rounded-off to the nearest multiple of rupees ten.
Non-Agricultural
Incomes from Land
The following incomes, are not derived
from land used for agricultural purposes, hence they are non-agricultural
incomes:
1. Income from markets;
2. Income from stone quarries;
3. Income from mining royalties;
4. Income from land used for storing
agricultural produce;
5. Income from supply of water for
integration produce;
6. Income from self-grown grass, trees
or bamboos;
7. Income from fisheries;
8. Income from the sale of earth for
brick-making;
9. Remuneration received as manager of
an agricultural farm;
10. Divined
from a company engaged in agriculture;
11. Income
of the buyer of a ripe crop;
12. Income
from dairy farm, poultry farming, etc.; and
13. Income
from interest in arrears of rent of agricultural land.
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