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Agriculture income

Shubham Jain (Haryana) (131 Points)

30 January 2015

how to calculate tax on A.I.

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CA BHAVIN (proprietor) (26 Points)
Replied 30 January 2015

1) A.l is exempt 2)Rebate on agri income Tax on Total income + A.I Less-tax on basis exemption limit+ A.I __________________________________ Diff. ----- Is Tax playable

CA Pankaj Kr Agrawal (@Helping Hand) (2143 Points)
Replied 30 January 2015

Taxability of Agricultural income post amendment by Finance (No.2) Act, 2014

Agricultural income is exempt from Income Tax under section 10(1) of the Income Tax Act, 1961. However, its included, for rate purposes, in computing the Income Tax Liability if following two conditions are cumulatively satisfied:

Net Agricultural income exceeds INR 5,000/- for P.Y. 2014-15, and
Total income, excluding net Agricultural income, exceeds INR 2,50,000/-.

Kindly note that the aforementioned condition at Serial No.2 shall change to INR 3,00,000/- in case if the Assessee is an individual who falls in the age bracket of 60 to 79 Years during the P.Y. 2014-15, and to INR 5,00,000/- in case if the Assessee is an individual who is of the age of 80 Years or more during the P.Y. 2014-15.

Once the aforementioned conditions are satisfied then we shall compute the Tax liability in the following manner:

First, include the Agricultural income while computing your income Tax liability. Example – Let us say that an Individual Assessee has a Total income of INR 7,50,000/- (excluding Agricultural income) and a Net Agricultural income of INR 100,000/-. Then, per this step, Tax shall be computed on INR 7,50,000/- + INR 1,00,000/- = INR 8,50,000/-. Thus,income Tax amount as per this step shall be INR 95,000/- for an individual who is below the age of 60 Years during the P.Y. 2014-15.

Second, add the applicable basic Tax slab benefit, as applicable, to the Net Agricultural income. Thus, per our example mentioned above we shall add INR 2,50,000/- to INR 1,00,000/- as the applicable Tax slab benefit available to an individual below 60 Years of age is INR 2,50,000/-. Now we will compute income Tax on INR 3,50,000/- (Tax slab benefit 2,50,000 + Net Agricultural income 1,00,000). The amount of Tax shall be INR 10,000/-.

Third, subtract the Tax computed in Second step from the Tax computed in First step = INR 85,000/-. Thus, this is the income Tax liability subject to deductions, Education cess etc., as applicable.

The aforementioned treatment of Agricultural income has been illustrated subject to Finance (No.2) Act, 2014.

Example is taken for AY 2009-10

Q. I HAVE business income of Rs 1,95,000 and agricultural income of Rs 2,95,000. These figures relate to the assessment year 2009-10. How will my tax liability be computed?

A. Agricultural income is exempt under Section 10(1) of the Act so long as the income is derived from agricultural land situated in India. This income is, however, included merely for rate purposes and rebate is allowed on the same in accordance with the Finance Act. No Tax is payable if total Income of an individual do not exceed 1,50,000/- . The inclusion of agricultural income for rate purposes is only required where the total income exceeds Rs 1,50,000.

PARTICULARS	RUPEES
Business Income	1,95,000/-
Agricultural Income	2,95,000
Income Including Agricultural Income	4,90,000
Tax on 4,90,000/-	53,000/-
Less: Rebate on Agricultural Income
(Tax on 2,95,000+ 1,50,000 being basic Exemption)	44,000/-
Net Tax Payable	9,000/-
Add: Education Cess 3%	270/-
Total tax Payable	9,270/-