Income Tax

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Introduction to Agricultural Income

As per the Income Tax Act income earned from any of the under given three sources are meant to be Agricultural Income;

← Any rent received from land which is used for agricultural purpose:  Assesses do not have to pay tax on rent or revenue from agricultural land. Such land should, of course, be assessed to land revenue in the country or be subject to a local rate. Further, there must be a direct link between the agricultural land and the receipt of income by way of rent or other revenue (for instance, a landlord could receive revenue from a tenant).

← Any income derived from such land by agricultural operations:

Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce.

← Income attributable to a farm house: 
Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc. Income from such farm houses is considered agricultural income.

The definition of `farm houses’ covers buildings owned and occupied by both cultivators of agricultural land and assesses who receive rent or revenue from agricultural land. The sole purpose of such farmhouses should be for use as dwellings for the cultivators or use as store houses. Normally, the annual value of a building is taxable as `income from house property’. However, in the case of a farm house, the annual value would be deemed agricultural income and would, thus, be exempt from tax.

← Income earned from carrying nursery operations:
Income earned from carrying nursery operations is also considered as agricultural income and hence exempt from income tax.

In order to consider an income as agricultural income certain points have to be kept in mind.

✓ There must me a land.

✓...
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