Is Agriculture Income Taxable in India?- A Simplified Guide

In India, agriculture income is generally exempt from income tax. According to the Income Tax Act, agriculture income earned from agricultural land is not considered part of the individual's total income. Therefore, it is not consider into tax slab. However, if the taxpayer has non-agricultural income or other sources of income, those may be taxable as per the relevant tax laws and provisions. It's important to understand the specific guidelines and consult a tax professional for accurate advice.

Key Understanding of Agriculture Income

The Income Tax Act defines agricultural income as encompassing three primary activities:

• Revenue is obtained from renting or leasing agricultural land used for agricultural purposes in India. Rent represents the amount paid for land utilization, excluding consideration from land sale. Income derived from farming activities, both basic and subsequent operations directly related to the land, qualifies as agricultural income. Non-land-related businesses like poultry farming are not considered agricultural income.

• Profits earned from selling products derived from agricultural land. Income from products is exempted as agricultural income, while other revenues are non-agricultural (taxable).

• Revenue from renting or leasing buildings situated on or near agricultural land. To be considered income from agriculture, the property must be on or near the farmland, rented by the farmer, and used for residential or storage purposes.

Also Read:- Automatic Soymilk Plants Doubling the Income of Small/Medium Entrepreneurs in India- Success Stories

The state government can levy taxes on agricultural income exceeding Rs. 5,000 per year. However, this applies only if specific conditions are met:

1. This taxation method applies to individuals like HUFs, BOIs, AOPs, and artificial legal entities for calculating their taxable income. Companies, cooperative societies, firms/LLPs, and local authorities are excluded.

2. The gross agricultural revenue should exceed Rs. 5,000 during the entire year.

3. Non-agricultural income should surpass:

- Rs. 2,50,000 for individuals under 60 and other eligible persons.

- Rs. 3,00,000 for individuals ranging between 60 to 80 years.

- Rs. 5,00,000 for individuals over 80 years of age.

Conclusion

Agricultural income is generally tax-free in India. However, income earned from non-agricultural activities on agricultural land and certain farm-related services may be taxable. Understanding the distinction between agricultural and non-agricultural income is essential to ensure compliance with tax laws and regulations. As tax rules may change over time, seeking professional advice is advisable for accurate and up-to-date information.

Also Read:- What are SHGs and Their Key Role to Boost Farmer’s Income

Frequently Asked Questions (FAQs)

Is agricultural income completely tax-free?

Yes, agricultural income is generally considered completely tax-free in India. As per the Income Tax Act, of 1961, income earned from agricultural activities on agricultural land is exempt from income tax. This exemption is aimed at supporting and promoting the agricultural sector, which plays a crucial role in the nation's economy and rural livelihoods.

What is the range for agricultural income to be tax-free?

When the farmer’s earnings are lower than Rs.5,000, it is tax-free. However agricultural income is taxable as per the applicable tax rates and slabs.

What is the process to calculate agricultural income?

The process to calculate agricultural income is relatively straightforward. One needs to determine the total income earned from agricultural activities during the financial year. This may include income from crop cultivation, animal husbandry, horticulture, and other agricultural ventures.

List the different types of agricultural income.

Different types of agricultural income include:

• Income derived from sales of agricultural products.
• Income obtained from farm building is required for the agricultural purpose.

Which types of income are not considered agricultural income in India?

Certain types of income are not considered agricultural income in India and are taxable. These include:

• Income from activities that do not involve basic agricultural operations, such as processing, packaging, and marketing of agricultural products.
• Dairy Farming
• Fisheries
• Poultry Farming

Also Read:- A Programme to Support Income Independent of Crop Production Could Boost Agriculture in a Long-Term Way