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1. Prepared by-
Dr. Ramesh Kumar
Assistant Prof.
Harishchandra P.G. College

2. Exemption of Agricultural Income under the Income
Tax Act, 1961
Introduction-
Agricultural income is exempt under Section 10(1) of the
Income Tax Act, 1961. However, net agricultural income is
added to the total non-agricultural-income computed as per
income tax Act, 1961, for the purpose of determining the
income tax on non agricultural income as Assessee, although
the agricultural income will be fully exempt.

3. Exemption of Agricultural Income under the Income
Tax Act, 1961
• Definition of Agricultural Income-
Agricultural income is defined under section 2(1A) of the Income-tax
Act. As per section 2(1A), agricultural income generally means .
a) Any rent or revenue derived from land which is situated in India and
is used for agricultural purposes.
b) Any income derived from such land by agriculture operations
including processing of agricultural produce so as to render it fit for
the market or sale of such produce.
c) Any income attributable to a farm house subject to satisfaction of
certain conditions specified in this regard in section 2(1A). Any
income derived from saplings or seedlings grown in a nursery shall
be deemed to be agricultural income.

4. Exemption of Agricultural Income under the Income
Tax Act, 1961
• Aforesaid income treated as ‘Agricultural Income’ only when
the following conditions are satisfied-
1. Income should be derived from the land-
2. Land should be situated in India-
3. Land should be used for Agricultural purpose-
a) Basic operation
b) Subsequent operation-

5. Exemption of Agricultural Income under the Income
Tax Act, 1961
1. Any rent or revenue derived from land which is situated in
India and is used for agricultural purposes:
In this concern the following condition must be satisfied to
treated income derived from a land as ‘Agricultural
income’-
a) Rent or revenue should be derived from the land
b) Such land should be situated in India
c) The land should be used for Agricultural and

6. Exemption of Agricultural Income under the Income
Tax Act, 1961
1. Rent from the land-
Rent should be a payment in cash or kind, or in money’s worth, by
one person to another person in respect of a grant of right to use
land. For this purpose there should be established a relation of land
lord and tenant, lesser and lessee. For example, the share of
Agricultural produce receive by the land lord is though in kind but it
is rent.
2. Revenue from the land;-
The expression ‘any revenue’ would means income of every kind
derive from agricultural land other than,
a) Rent or
b) The income which falls under the section 2(1A)(b) and (c)

7. Exemption of Agricultural Income under the Income
Tax Act, 1961
2-Any income derive from such land by agricultural
operation including processing of the Agricultural
produce, so as to render it fit for the market- [sec.
2(1A)(b)]-
It infer to the following three instances of Agriculture
income-
A. Any income derive by Agriculture from the land situated
in India and used for agricultural purpose, the following
will be treated as income derive by agriculture from land
i. Standing crop or raw produce after harvest, sold by the
agriculturist himself.
ii. Crop used by the cultivator for his own consumption
iii. Crop used as a raw material by the cultivator in his own
business.

8. Exemption of Agricultural Income under the Income
Tax Act, 1961
B- Any income derived by a cultivator/ receiver of rent, in kind of
any process ordinarily employed to render the produce
raised/received by him to make it fit or the market-
It means the produced raised from the land may
not have a market in its native form; it may necessary to
perform a process on the produce to make it marketable,
saleable. Such as may called ‘Agricultural process’ for the
sake of convenience. If produce in it native form
marketable itself, then the income attributable to the
process shall not be agricultural income.

9. Exemption of Agricultural Income under the Income
Tax Act, 1961
C- Any income derive from the sale by a cultivator/
receiver of rent in kind of the produce raise/ receive by
him in respect of which on process has been performed
other than a process of the nature as referred in (2)
above-
Income from sale of agricultural produce is
exempt from tax to the extent to which no process has
been performed on the produce, except the marketing
process discussed above.
If any other processes have been performed, the
sale proceeds will have to be disintegrated to find out
that form of it which constitutes agricultural income, so
as to exempt that part alone from income tax.

10. Exemption of Agricultural Income under the Income
Tax Act, 1961
3- Any income attributable to a building (form
house ) is treated as agricultural income-
If the following condition are satisfied [sec. 2 (1A)(c)]-
a) The building is on/ in the immediate vicinity of land
situated in India which use for agricultural purpose.
b) It is occupied by cultivator/ receiver of the rent
c) It is used (a) dwelling house (b) store house,
d) The land is assessed to land revenue or local rate, however
if it is not assessed to revenue or local rate then such land
should be situated outside from urban area.
If all the above conditions are satisfied then the income from
such form house is exempt from tax.