Any rent or revenue derived from agricultural land
Any Income derived from such land by-
i) agriculture, or
ii) processing of agricultural produce, or
iii) sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him.
Income derived from building on agricultural land.
Notes:
i) The building should be on or in the immediate vicinity of the land
ii) The building is used by the cultivator or receiver of rent as a dwelling house, or as a store house, or other out building.
iii) Land should not fall in definition of capital asset i.e. it should be agricultural land situated in rural area.
Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
2. Section 10: Agricultural income exempt from tax
Agricultural income is exempt from tax under section 10.
However, for computation of income tax, agricultural income is aggregated with non-agricultural income if:
I) Assessee is an individual, HUF, AOP/BOI (taxable at normal rates applicable to an individual).
II) Assessee has non-agricultural income which exceeds the taxable limit.
III) Agricultural income exceeds Rs. 5,000.
3. Aggregation of agricultural income with non-agricultural income and computation of income tax
Step 1: Net agricultural income to be computed as if it were income chargeable to income tax. In case of an assessee engaged in business of growing and manufacturing tea, 60% of income computed is agricultural income.
Step 2: Aggregate agricultural income and non-agricultural income of assessee and calculate income tax on average income as if such aggregate income were the total income.
Step3: Increase the net agricultural income by the first slab of income on which tax is charged at nil rate i.e. for AY 2018-19/ 2019-20, income is to be increased by:
Step 4: Reduce the amount of income tax determined at Step 2 by the amount of income tax determined under Step 3.
Step 5: Calculate the balance. Add education cess and secondary and higher education cess.
Step 6: Amount so arrived is the income tax payable by the assessee.
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