Agriculture income in Income Tax

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Quick Summary

Agricultural income in the UK is generally exempt from income tax under Section 10(1) of the Income Tax Act, 1961. While you declare net agricultural income in your tax return, specific forms (ITR-2 or 3) are required if your agricultural income exceeds £5,000. Even if your agricultural income is substantial, a formal Profit & Loss statement isn't always necessary, but you'll need documentation to substantiate your earnings. Importantly, while the agricultural income itself isn't taxed, it can affect the tax bracket for your other professional earnings.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

13 May 2023 Respected Experts.

one of my family friend is having 1 Agricultural land valuing 30 Lakhs and cultivating from it.

He asked to File his IT

can we prepare a P&L and Balance sheet for the Agricultural based Business

Or just can we show the Net Agriculture income in ITR without expenses

Additional Note:

He has Professional income as a Drama Artist - 30K per month

Kindly advise

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

13 May 2023 Under Section 10(1) of the Income Tax Act, 1961, any income generated from any agricultural activities are exempted from being taxed.
Net agricultural income is declared in ITR.
In ITR 1&4, agricultural income should be reported in the Agriculture Income column. However, ITR 1&4 must only be used if agricultural income is up to Rs.5,000. If the stated income goes over this limit, form ITR-2 or 3 must be filed.
If a farmer's income is less than Rs.5,000 or if the total income minus the agricultural income is less than the basic exemption limit which is Rs.2.5 lakh for a person below the age of 60 years and Rs.3 lakh for an individual aged 60 years and above, then the income generated will be exempted from being taxed.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

13 May 2023 Thank you so much sir,

So for Preparation of P&L Statement is not necessary for the Agriculturist right, even he earns in multiple lakhs.

Additionally, if i declare 600,000.00 as Agricultural Income ( Net) hope there will be no tax on the same.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

13 May 2023 1. Agricultural income is based on area of land, crop harvested, seeds purchase bills, revenue records, water & electricity facilities, sells bills etc. etc.. You have to authenticate the earnings based on these facts, though proper accounts may not have been maintained.
2. The agricultural income would not be taxed, but your slab rate of other income gets raised to its proportionate.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

13 May 2023 Thank you so much for your detailed explanation sir.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

14 May 2023 You are welcome.

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