agriculture income

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2010 how to calculatr in.tax on agriculture income.pls help with example

CA. Pradeep Nayak

CA. Pradeep Nayak (Expert)
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27 July 2010 Agricultural income is exempt from income tax u/s 10(1).

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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27 July 2010 Tax after including agricultural income in total income:- Although agricultural income is fully exempt from tax, the Finance Act, 1973, introduced a scheme whereby agricultural income is included with non-agricultural income in the case of non-corporate assessees who are liable to pay tax at specified slab rates. The process of computation is as follows:
(a) Income tax is first calculated on the net agricultural income plus the assessee’s total income from non-agricultural sources.
(b) Income tax is then calculated on the basic exemption slab increased by the assessee’s net agricultural income.
(c) The difference between (a) and (b) is the amount of tax payable by the assessee.
This process of computation is, however, followed only if the assessee’s non-agricultural income is in excess of the basic exemption slab.
Clearly, despite agricultural income being tax-exempt, assessees have to be extra careful while dealing with such income. They must make sure that they aggregate agricultural income with their total income to avoid interest payments and possible penalties for concealment of income. Assessees must also maintain credible records to provide the tax authorities with proof of ownership of agricultural land and evidence of having earned agricultural income.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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27 July 2010 Although agricultural income is not taxable, it must be included with non-agricultural income in the case of non-corporate assessees who pay tax at prescribed slab rates. Resultantly, the rate of tax on non-agricultural income is higher for such assessees. Take the case of Tushar Singh, who earned an agricultural income of Rs 1,50,000 and non-agricultural income of Rs 2 lakh during the year ended March 31, 2009. Singh’s tax liability is to be calculated as follows:
(a) Agricultural income (Rs 1,50,000) plus non-agricultural income (Rs 2 lakh) = Rs 3.5 lakh.
(b) Income tax on Rs 3.5 lakh = Rs 25,000
(c) Tax on agricultural income of Rs 1,50,000 plus basic exemption of Rs 1.50,000 = Rs 15,000.
(d) Tax payable = (b) – (c) = Rs 10,000/-

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