Agricultural Income Tax: Questions are often raised about tax on farmers’ income in India. It is generally believed that the income of farming is tax free, but it is not in every situation. Know under which circumstances farmers may be required to file income tax returns.
Tax on other income related income
Different rules apply to professional farming
No tax on subsidy or grant from farming
If the land is given on lease then the rules will be different
Rules on horticulture and forest products are also different
There is no tax on farming income
When needs to file ITR
It is important to keep documents and evidence
Tax on other income related income
If there is income from business or jobs other than farming, then the rules change. Total income is calculated by adding earnings out of farming. This is called Partial Integration of Agricultural Income. That is, earnings outside farming can be taxed.
Different rules apply to professional farming
If a person does contract farming or large corporate farming. And if it earns like business income, then tax will be levied. This is when farming activities are less and more processing. In such cases, income is considered a business income.
No tax on subsidy or grant from farming
The subsidy received from the government or the state government is completely tax free. It is exempted under Section 10 (1) of the Income Tax Act. Subsidies found on farming equipment or seeds also come in it. This benefit is given to reduce the cost of farmers.
If the land is given on lease then the rules will be different
If the farmer earns his land on rent. So this income will be considered as an income of rent, not agricultural income. In such a situation, it will come under the purview of income tax. That is, there will be no benefit of exemption for not farming.
Rules on horticulture and forest products are also different
Selling wood or plants from the forest is income from selling products. If this is done naturally, it will not be considered to be the income of farming. This income may have to pay tax. Only the income of horticulture made by farming is exempted.
There is no tax on farming income
Agriculture income is exempted from income tax. This means that there is no tax on the earnings from farming. This exemption applies to the income received on selling farming yield. This provision has been designed to provide economic relief to farmers.
When needs to file ITR
If non-agricultural income is higher than the basic exemption limit. So it may be mandatory for such a farmer to fill ITR. Tax will be calculated by adding agricultural income. However, farming income is not taxed.