Agriculture income or business income

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sivareddy (Querist)
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19 June 2026 Sir,

A client has started a nursery business on 6 acres of leased agricultural land. He purchases live plants ranging from 2 feet to 8 feet height from other nurseries. These plants are then maintained in the nursery for more than 6 months. During this period, labourers carry out watering, manuring/fertilizer application, pruning, cutting and other growth-related activities. The plants undergo substantial biological growth before being sold.

In these facts, whether the income from sale of such grown plants can be treated as Agricultural Income under Section 2(1A) of the Income-tax Act, 1961, or should it be assessed as Business Income?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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19 June 2026 The income from the sale of the grown plants qualifies as Agricultural Income under Section 2(1A) of the Income-tax Act, 1961. Although the plants were initially purchased, the application of human labor (watering, pruning, manuring) on agricultural land over a period of 6+ months resulting in substantial biological growth transforms the activity from mere trading (Business Income) into core agricultural operations. Explicit support is also found in Explanation 3 to Section 2(1A), which deems income from saplings or seedlings grown in a nursery as agricultural income.

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