Partial taxation of Agricultural income

There are some businesses which include some activities as Agricultural and some as non- agricultural. However the problem arises in taxation as to how much portion is to be treated as Agriculture and how much as non-agriculture. Hence Income-tax Act, 1961 has given some percentage where some part is treated as agricultural business while rest shall be non-agricultural income. These businesses include manufacturing of tea, coffee or rubber in India.

The bifurcation of agricultural and non-agricultural part for each type of business is as follows:-

Particulars of business Agricultural (Exempt) portion Non-agricultural (Taxable) portion
Growing & Manufacturing of tea 60% 40%
Growing & Manufacturing of rubber 65% 35%
Growing & Manufacturing of coffee 75% 25%
Growing & Manufacturing of coffee grown, cured, roasted and grounded 60% 40%

E.g. :- Mr. Roy is an agriculturist. He is having agricultural land in Assam where he grows and manufactures tea. During the financial year 2014-15, he produced tea amounting to Rs. 12 crores. How much will be the taxable turnover for F.Y. 2014-15?

Ans. :- Income-tax Act has provided that 60% shall be exempt from tax out of total manufacturing of tea in India. Hence, out of Rs. 12 crores, agricultural portion is Rs. 7.20 crores. And taxable turnover of Mr. Roy is Rs. 4.80 crores for financial year 2014-15.

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Partial taxation of Agricultural income
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There are some businesses which include some activities as Agricultural and some as non- agricultural. However the problem arises in taxation as to how much portion is to be treated as Agriculture and how much as non-agriculture. Hence Income-tax Act, 1961 has given some percentage where some part is treated as agricultural business while rest shall be non-agricultural income.
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myITreturn
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