Agricultural income [Section 10(1)]

Agricultural income [Section 10(1)]

Section 10(1) provides that agricultural income is not to be included in the total income of the assessee. The reason for totally exempting agricultural income from the scope of central income-tax is that under the Constitution, the Central Government has no power to levy a tax on agricultural income.

Definition of agricultural income [Section 2(1A)]

This definition is very wide and covers the income of not only the cultivators but also the land holders who might have rented out the lands. Agricultural income may be received in cash or in kind.

Agricultural income may arise in any one of the following three ways:-
  
    (1)   It may be rent or revenue derived from land situated in India and used for agricultural purposes.

     (2) It may be income derived from such land

(a) Through agriculture

or

(b) The performance of a process ordinarily employed by a cultivator or receiver of rent in kind to render the produce fit to be taken to the market

or

(c) Through the sale of such agricultural produce in the market.

    (3) Lastly, agricultural income may be derived from any farm building required for agricultural operations.

Reference: The Institute of Charted Accountants of India.