Income Tax: The government has issued clear guidelines regarding implementation of tax on agricultural income. The income earned from farming or the farmer has been kept out of the tax net. However, income from some agricultural activities has been kept in the tax net with conditions and exemptions. Whereas, state wise and central government have kept the cultivation of some crops in the commercial category and the income earned from them has been kept in the tax net with exemption. Let us know about it in detail.
According to income tax rules, people earning more than Rs 3 lakh annually must file income tax returns, although there is no tax on it. Similarly, for the working class, the government has made the annual income of up to Rs 7 lakh tax free with conditions. In such a situation, the government has also issued clear guidelines regarding the implementation of tax on agricultural income. Under income tax rules, the income earned from farming or the farmer has been kept out of the scope of tax. However, income from some agricultural activities has been kept in the tax net with conditions and exemptions. Whereas, state-wise and central governments have kept the cultivation of some crops in the commercial farming category and the income from them has been kept in the tax net with exemptions and conditions. Let us understand what type of farming income comes under tax rules.
This type of farming comes under the tax net
According to the Income Tax Act 1961, it is necessary to show agricultural income more than Rs 5,000 in ITR. According to Section 2 (1A) of the Income Tax Act, income from activities related to certain agricultural activities on agricultural land has been exempted from tax.
- The income from tea cultivation comes under the ambit of tax.
- Similarly, the income from coffee or rubber cultivation comes under the ambit of tax.
- The income from sheep farming comes under the ambit of tax.
- The income from dairy work comes under the ambit of tax.
- Income from sale of trees is also in the tax net.
- Animal trade also comes under the ambit of tax.
- Income in the form of rent from land or building also comes under the ambit of tax.
- However, the government has imposed tax on such earnings with some exemptions and conditions.
How is income tax applied?
If a farmer cultivates tea, then 40 percent of the total income from it will be taxed, while 60 percent of the income will get the benefit of tax exemption. Cultivation of crops like tea, rubber or coffee has been kept in the category of commercial farming and the income earned from these is taxed with exemption by the central government. The list of commercial crops may vary state-wise and the tax rate may also be different.
