Agriculture Income Tax is often neglected in India, even by people having good income from it, thanks to ignorance and misbeliefs. Agriculture income in India is exempted from income tax under certain conditions, under section 10 (1) of Income Tax act. This does not mean that you need not pay tax on your agriculture income. As a matter of fact, agriculture income is also taxable on certain conditions.
What is an Agriculture Income.
Agriculture Income has been clearly defined under section 2(1)A of Income Tax act. Your Income can be considered as Agriculture Income if it satisfies following conditions.
- Revenue generated through rent or lease of a land (in India) that is used for agriculture purposes.
- Income generated by commercial sale of a produce gained from an agriculture land.
- Revenue generated through the renting or leasing of buildings in and around agriculture land.
Exclusions from Agriculture income
- Revenue from sale of processed agriculture produce without actual agricultural activity
- Income from trees sold as timber
- Revenue from extremely processed produce
Agriculture Income Tax – When you need to pay it.
Tax on Agricultural income is to be paid if following two conditions are satisfied cumulatively.
- Net Agricultural income exceeds Rs.5000 and
- Total income, excluding net Agricultural income exceeds the basic exemption limit.
Agriculture Income Tax – How to calculate?
If Agricultural Income=(A) and Other Income = (B). Then Compute Tax on (A)+(B). Let tax thus computed is (T1)
Let the Basic Exemption slab for income tax payment is (E) and Agricultural income (A). Compute Tax on (A)+(E). Let tax thus computed is (T2)
Actual Income Tax liability will be (T1-T2)
Thus the formula for computing Agricultural Income Tax is IT=T(A+B)-T(S+A)
Agriculture Income Tax – Online Calculator
If you feel that this calculation is complex, you can use the Agriculture Income Tax – online calculator to calculate your Income Tax liability on your agriculture income.
You can calculate your complete Income tax liability with detailed calculations using Detailed Income Tax Calculator (without Agriculture Income.)
Read more: Income tax returns e-filing made simple – a step by step guide
Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.