What is agricultural Income
(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b). any income derived from such land by agricultural or by the process employed to render the produce fit for market or by sale of such produce by a cultivator or receiver of rent-in-kind; (c). any income derived from a building provided following conditions are satisfied: - (i). The building is situated on or immediate vicinity (surrounding area) of the agricultural land. (ii). It is occupied by the cultivator or receiver of rent – in-kind. (iii). It is used as dwelling house, store house or out house and (iv). The land is assessed to land revenue or it is not situated in specified area. What is specified area
(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
(B) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.
Points to Note
1. The Land must be an agricultural land and it should be situated in India. If agricultural Land is not situated in India then the income will be chargeable as business income and not agricultural Income. 2. The agricultural income of the cultivator as well as the rent (both in money and in kind) received by the owner of the Agricultural land is exempt from tax. 3. The agricultural income of the cultivator or the receiver of rent in kind to make the agricultural produce fit to market is also exempt from tax. See here the tobacco can not be sold without drying it hence the activities till drying of tobacco will be treated as agricultural activity but the Industrial activity like ginning and pressing of cotton can not be included because cotton can be sold in the market without separating it from the cotton seed. 4. The agricultural activity involves the basic operation as well as subsequent operations also. The operation on land by the cultivator on the land like tilling (Plough, dig, cultivate), Sowing the seeds and similar operation of the land are called basic operations. See here that the Basic agricultural operations are made on the land itself and not on the growth of the land i.e. on the crop. The subsequent operation on the crop are weeding (removing the wild plants), digging the soil around the growth and operations to preserve the growth. The basic operations performed by the cultivator on the land are surely the part of agricultural activity for the purpose of this exemption but subsequent operations will only form part of the agricultural activity if these are performed in continuation of the basic operations by the cultivator or the receiver of rent in kind. If the standing crop is purchased by a person and subsequent operations are done by him then the income will not be treated as agricultural income. The principal for determination of basic and subsequent operations have been described in the case of CIT vs. Raja Benoy Kumar Sahas Roy by Hon. Supreme court of India .
What is added by Finance Act. 2008
The finance Act, 2008 has added the following two types of nursery activities in the definition of Agricultural income for which there was a controversy before this enactment:- 1. Sapling:-Develop the small trees and sale them for further growth. 2. Seedling: - Develop the seeds.
Income which is partially...
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