Meaning of Agriculture Income
As per section 2(1A), Agriculture income means-
- Rent from agriculture land which is used for agriculture purpose.
- Income from sale of agriculture produce (Note-1)
- Rent from house which is used for dwelling house, store house etc.
- Income from nursery.
Note-1
As per Rule-7 Sale of agriculture produce
- If agriculture produce sale in raw form then it is treated as agriculture income.
- If sale is made after process then it divided in to two categories
- If process is compulsory for sale then total income is agriculture income
If process is optional for sale
Agriculture income is
| Particulars | Amount |
| Fair Market Value of Agriculture product further process | xx |
| Less: Cost of agriculture product | xx |
| Agriculture Income | xxx |
Profit or gain from business or profession is
| Particulars | Amount |
| Sale of final product | xx |
| Less: Fair Market Value of agriculture used | xx |
| Less: Further propose cost | xx |
| Profit or gain from business or profession | xxx |
Special rules for Tea, Coffee and Rubber
| Rule | Activity | Agriculture Income | Business Income |
| Rule-8 | Growing and manufacturing of Tea | 60% | 40% |
| Rule-7B | Income from Growing and manufacturing of coffee | ||
| A) Grown and cured | 75% | 25% | |
| B) Grown,cured,roasted and grounded | 60% | 40% | |
| Rule-7A | Income from growing and manufacturing of rubber | 65% | 35% |
Partial Integration in case of Agriculture Income
Agriculture Income is exempt from tax but for computation of tax shall be considered if following conditions are satisfied:-
- Assessee is Individual, HUF,AOP,BOI and Artificial Judicial persons
- Agriculture income is more than Rs:5,000
- Non agriculture income more than basic exemption.
Computation of Tax liability
| Particulars | Amount | |
| Non agriculture Income (Total Income) | A | xx |
| Agriculture Income | B | xx |
| Total (A+B) | C | xxx |
| Tax payable on C | D | xx |
| Aggregation of B and Basic exemption | E | xxx |
| Tax payable on E | F | xx |
| Net tax payable (D-F) | G | xx |
Notes:
- Bifurcation should be done after claiming deduction u/s 33AB & other profit or gain from business or profession deduction like deprecation etc.
- If income of assessee partly from business & partly from agriculture then, deprecation has to be calculated on assumption that total income of assessee is from business only. Depreciation calculated shall be deemed to be allowed to assessee. (Total deprecation shall be reduce from WDV of block)
