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Agricultural Income
Direct Taxation
Sir/Madam, If you refer the below images, The Income Tax Act,1961{Ch-III, Section 10(1)} classifies Agricultural income as "Incomes not included in total income". But in the ICAI Study Material, they mentioned "Reason for total exemption of agricultural income is, the CG has no power to levy tax on agricultural income". As per Income Tax Act 1961, agricultural income is not included in the total income, while it has not mentioned that Agricultural Income is exempt. So - 1. What is the reason behind ICAI Study Material mentioning agricultural income as Exempt Income ? Even though Income Tax Act,1961 provides Rebate on Agricultural Income, as we know that indirectly, tax is levied on the agricultural income. So - 2. How can CG tax the agricultural income, which it does not have the power to levy tax on it ?
Answers (11)
CA Suraj Lakhotia Admin
Section 10 exempts agricultural income. Tax is not levied on agricultural income but on other income
Sir, In the bare Act, Where can we find that "Section 10 exempts agricultural income"? Because, Section 10 only classifies Agricultural Income as "Income which do not form part of total income" and not exempt income. Also, as Agricultural income is the reason for increase in the income tax slab rates for the person having both agricultural and Non-Agricultural income, Should we really call it an exempt income or we should only depict as "Income do not form part of total income" ? But, I think there is a difference between "Income not included in the total income" and "Exempt income" ? Am I Correct or not ?
As per article 246 of constitution power to make laws with respect to Central, state,both this list available in schedule 7 of constitution and list 1 is for union list and entry no. 82 of union list says 'parliament to make law on tax on income other than agriculture income ' So in constitution of India there no right to levy tax on agriculture
CA Suraj Lakhotia Admin
Income which do not form part of total income means exempt income
Sir, The term "Exempt Income" is not defined in the section 2 of the Income Tax Act. So, where to find that ?
Thread Starter
Avasarala Vivek AdityaSir, The term "Exempt Income" is not defined in the section 2 of the Income Tax Act. So, where to find that ?
Also, as Agricultural income is the reason for increase in the income tax slab rates for the person having both agricultural and Non-Agricultural income, Should we really call it an exempt income or we should only depict as "Income do not form part of total income" ?
Thread Starter
Avasarala Vivek AdityaAlso, as Agricultural income is the reason for increase in the income tax slab rates for the person having both agricultural and Non-Agricultural income, Should we really call it an exempt income or we should only depict as "Income do not form part of total income" ?
Partial integration results in utilization of basic exemption to agricultural income first and balance to the non agricultural income. It does not mean that the agricultural income is taxable. It is just non agricultural income is taxed at higher rate if you have both agri and non agri income.
Yoga Vishnu
Partial integration results in utilization of basic exemption to agricultural income first and balance to the non agricultural income. It does not mean that the agricultural income is taxable. It is just non agricultural income is taxed at higher rate if you have both agri and non agri income.
Study material mentions - "A method has been laid to levy tax on agricultural income in an indirect way. This concept is known as Partial integration method".
Thread Starter
Avasarala Vivek AdityaStudy material mentions - "A method has been laid to levy tax on agricultural income in an indirect way. This concept is known as Partial integration method".
Intention of law is not to tax agricultural income. Intention is to ensure that the tax burden on assessees with similar income does not differ sharply merely because of the fact that part of it is derived from agriculture. If assessee has agricultural income and non agricultural income, then advantage of taxing the non agricultural income at lower slab rate will not be given. It will be taxed at next higher tax rate after including the agricultural income
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