How is Agricultural income taxed?

Agricultural income is not taxable in India. Hence, taxpayers who having agricultural income as the only source of income are not required to file their Income-tax return. However if taxpayer is earning any other income besides agricultural income like salary, house rent, business income etc., then he is required to file his return for that financial year.

Click here to know slab rates for individuals (F.Y. 2015-16).

The procedure for taxation of taxpayers having agricultural plus other incomes is as follows-

Step 1- Agricultural income is added to other incomes of the taxpayer assuming that it is taxable income. Hence, total income is calculated.

Step 2- Tax on such total income is calculated as per slab rates.

Step 3- Agricultural income is added to the basic exemption limit of taxpayer. Tax is calculated again on such income.

Step 4- Difference between both the above taxes is actual tax liability of taxpayer. Education cess, surcharge is added to this amount. And total tax payable is paid by taxpayer.

E.g. Mr. Anand (age 30 years) owns a piece of land near Hyderabad. Half of the land is used by him for agricultural purpose while the other half is hired for commercial activities like marriage, functions etc. During F.Y. 2014-15, he earned Rs. 1,40,000/- as agricultural income and Rs. 4,12,000/- from commercial activities. What will be his tax liability for F.Y. 2014-15?

Ans.:- Computation of Total income and tax payable of Mr. Anand for F.Y. 2014-15 as follows

Particulars Amount (In Rs.)
Business income 4,12,000
Agricultural income 1,40,000
Total Income 5,52,000
Now, Tax Calculation –
Upto Rs. 2,50,000                               Nil Nil
Rs. 2,50,000 to Rs. 5,00,000              10% 25,000
Rs. 5,00,000 to Rs. 10,00,000            20% 10,400
Above Rs. 10,00,000                          30%
Tax Liability (A) :- 35,400
Agricultural income 1,40,000
Basic exemption limit 2,50,000
Total income 3,90,000
Now, Tax Calculation –
Upto Rs. 2,50,000                               Nil Nil
Rs. 2,50,000 to Rs. 5,00,000              10% 14,000
Rs. 5,00,000 to Rs. 10,00,000            20%
Above Rs. 10,00,000                          30%
Tax Liability (B) :- 14,000
Actual tax liability (difference between A and B) 21,400
Add :- Education & higher education cess at 3% 642
Tax payable Rs. 22,042

Hence the tax payable by Mr. Anand for F.Y. 2014-15 is Rs. 22,042/-

Click here to know more about Agricultural income.

Click here to know tax treatment in case of partly agricultural income.

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How is Agricultural income taxed?
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Agricultural income is not taxable in India. Hence, taxpayers who having agricultural income as the only source of income are not required to file their Income-tax return. However if taxpayer is earning any other income besides agricultural income like salary, house rent, business income etc., then he is required to file his return for that financial year.
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