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    Agriculture Income Synopsis

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    qubrex1
    The document discusses various aspects of agriculture income under the Income Tax Act: 1) Section 10(1) states that agriculture income is tax free. Section 2(1A) defines agriculture income as income derived from agricultural land, agriculture operations to make produce marketable, or a farm house. 2) Income can be partly agricultural and partly non-agricultural for agro-based industries using self-grown raw materials. Rules provide how to calculate and segregate the two incomes. 3) Some examples of partial agriculture income include 35% tax on rubber production income and 40% of income from grown/processed coffee or tea being taxable. Several examples of purely non-agricultural income

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    Agriculture Income Synopsis

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    qubrex1
    544 views2 pages
    The document discusses various aspects of agriculture income under the Income Tax Act: 1) Section 10(1) states that agriculture income is tax free. Section 2(1A) defines agriculture income as income derived from agricultural land, agriculture operations to make produce marketable, or a farm house. 2) Income can be partly agricultural and partly non-agricultural for agro-based industries using self-grown raw materials. Rules provide how to calculate and segregate the two incomes. 3) Some examples of partial agriculture income include 35% tax on rubber production income and 40% of income from grown/processed coffee or tea being taxable. Several examples of purely non-agricultural income

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    The document discusses various aspects of agriculture income under the Income Tax Act: 1) Section 10(1) states that agriculture income is tax free. Section 2(1A) defines agriculture income as income derived from agricultural land, agriculture operations to make produce marketable, or a farm house. 2) Income can be partly agricultural and partly non-agricultural for agro-based industries using self-grown raw materials. Rules provide how to calculate and segregate the two incomes. 3) Some examples of partial agriculture income include 35% tax on rubber production income and 40% of income from grown/processed coffee or tea being taxable. Several examples of purely non-agricultural income

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    544 views2 pages

    Agriculture Income Synopsis

    Uploaded by

    qubrex1
    The document discusses various aspects of agriculture income under the Income Tax Act: 1) Section 10(1) states that agriculture income is tax free. Section 2(1A) defines agriculture income as income derived from agricultural land, agriculture operations to make produce marketable, or a farm house. 2) Income can be partly agricultural and partly non-agricultural for agro-based industries using self-grown raw materials. Rules provide how to calculate and segregate the two incomes. 3) Some examples of partial agriculture income include 35% tax on rubber production income and 40% of income from grown/processed coffee or tea being taxable. Several examples of purely non-agricultural income

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Synopsis

    Agriculture income

     Section 10(1) IT ACT states that agriculture income is tax free


     Section 2(1A) defines agriculture income.

    (a) Any rent or revenue derived from land which is situated in India and is used for
    agricultural purposes.
    (b) Any income derived from such land by agriculture operations including processing
    ordinarily employed by cultivator of agricultural produce so as to render it fit for the market
    or sale of such produce.
    (c) Any income attributable to a farm house subject to satisfaction of certain conditions
    specified in this regard in section 2(1A). Any income derived from saplings or seedlings
    grown in a nursery shall be deemed to be agricultural income.
     Judicial interpretation of term agriculture CIT v Benoy Kumar Sahas Roy AIR 1957 SC 768
    Basic operation
    Subsequent operation
     Process ordinarily employed to render the produce fit to be taken to market-Loofa case
    (sakarlal naranlal v. CIT AIR 1965 Guj 165)

     Partly Agricultural and Partly Non-agricultural Income

    Sometimes, income comprises of both agricultural as well as non-agricultural income. Such a


    situation arises in case of certain ‘Agro based industries where agricultural produce is used as raw
    material and it (i.e., raw material) is produced by the same person (i.e., industrialist) who
    manufactures industrial product by using such raw material. Such industries (i.e., persons), earn
    income by selling the industrial product manufactured from self grown agricultural raw material.

    For example :

    Mr. X is the owner of agricultural land in India and produces sugarcane by spending Rs. 2,00,000.
    Further, X set up an industrial undertaking to manufacture sugar from sugarcane so produced.
    Accordingly, he uses the whole quantity of sugarcane for producing sugar and spends Rs, 2,50,000 as
    industrial expenses. He ultimately sells the sugar so produced for Rs. 7,00,000.

    In this case, the total income of Mr. X shall be calculated as follows :

    Total Income = Sale proceeds of sugar - Cost of cultivation - Industrial expenses

    = Rs. (7,00,000 - 2,00,000 - 2,50,000) = Rs. 2,50,000

    The above total income of Mr. X is the composite income comprising of agricultural income and non-
    agricultural income. The income attributable to agricultural operations (i.e., raising of sugarcane) is
    agricultural income and the income attributable to industrial operations (i.e., manufacturing sugar
    from sugarcane) is non-agricultural income.

    In such a situation, it becomes necessary to disintegrate (bifurcate) the two incomes because
    agricultural income is exempt from tax and non-agricultural income is taxable.

    Rules 7, 7A, 7B and 8 of Income Tax Rules, 1962 provide the method of segregating the two
    incomes. These rules deal with calculation of agricultural income and non-agricultural income in
    such cases of composite income.

     Income from Growing and Manufacturing of Rubber 35% liable to tax and 65% agriculture
    income
     Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in
    India, with or without mixing chicory or other flavouring ingredients shall be computed as if
    it were income derived from business, and 40% of such income shall be deemed to be
    income liable to tax.
     Income derived from the sale of coffee grown and cured by the seller in India, shall be
    computed as if it were income derived from business, and 25% of such income shall be
    deemed to be income liable to tax.
     Income from Growing and Manufacturing of Tea 40% of such income, so arrived at, is
    treated as business income.

    The following are some of the examples of non-agricultural income:

    Income from poultry farming.


    Income from bee hiving.
    Any dividend that an organization pays from its agriculture income.
    Income from the sale of spontaneously grown trees.
    Dividend received by shareholder from a company carrying agricultural operations
    Commission earned by broker from selling agricultural produce
    Income from salt produced after the land has flooded with sea water.
    Purchase of standing crop.
    Royalty income from mines.
    Income from butter and cheese making.
    Receipts from TV serial shooting in farm house.

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