This is a ppt for taxation

1. India [Section 2(25A)]
The term 'India' means –
➢ the territory of India as per Article 1 of the Constitution,
➢ its territorial waters, seabed and subsoil underlying such waters,
➢ continental shelf,
➢ exclusive economic zone or
➢ any other specified maritime zone and the air space above its territory and territorial
waters.
Specified maritime zone means the maritime zone as referred to in the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976.

2. AGRICULTURAL INCOME
AGRICULTURE INCOME - Exempt u/s Section 10(1):
Section 10(1) provides that agricultural income is not to be included in the total
income of the assessee.
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.
The term agriculture income is defined in three parts under Income Tax Act u/s
2(1A)(a),(b),(c)
Income from leasing out agricultural land
Income from agricultural operations

3. 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. (either in cash or kind/ Assessee may be owner or tenant of
such land).
(However if any interest is recovered for late payment of rent then such interest
would be taxable u/h….??Other sources)
(2) It may be income derived from such land by
(a) Agriculture (eg Wheat produced, Cotton produced etc) 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 (Eg process
involved to remove rice from paddy etc) ie thrashing, cleaning, drying, crushing
etc or
(c) the sale, by a cultivator or receiver of rent in kind, of such agricultural produce
raised or received by him, in respect of which no process has been performed other
than a process of the nature mentioned in point (b) above.
(3) It may be derived from any Farm Building required for agricultural operations.

4. Let Us understand the above:
(1) Rent or revenue derived from land situated in India and used for agricultural
purposes:
The following three conditions must be satisfied for income to be treated as agricultural
income:
(a) Rent or revenue should be derived from land;
(b) land has to be situated in India (If agricultural land is situated in a foreign country,
the entire income would be taxable); and
(c) land should be used for agricultural purposes.
Note: ‘’Revenue” is much broader than rent. It includes income other than rent.
▪ Rent = Amount received in money or in kind, by one person from another for right to
use land.
▪ It can be received by the owner of the Land or the original tenant from the sub-
tenant(ownership of land is not necessary)

5. (2) Income derived from such land by
(a) Agriculture
• The term “Agriculture” has not been defined in the Act.
• However, cultivation of a field involving human skill and labour on the land can be broadly
termed as agriculture.
• “Agriculture” means tilling of the land, sowing of the seeds and similar operations.
• It involves basic operations and subsequent operations.
Basic operations = Operations by agriculturists which are absolutely
necessary for the purpose of effectively raising produce from the land.
Eg: Ploughing of land, sowing of seeds
Subsequent operations = Operations performed after the produce sprouts
from the land eg weeding, digging the soil around the growth, watering of the
plants at regular intervals, using pesticides and insecticides to protect the crop
etc
• Basic operation = Agricultural Income.
• Basic + Subsequent operations = Agricultural income.
• Only Subsequent Operation = Non-Agriculture income.

6. Non-agricultural income
Income from breeding of livestock.
Income from poultry farming.
Income from fisheries.
Income from dairy farming.
Any Income derived from any building would be agriculture income provided all the
following conditions are satisfied sec2(1A)(c):
(a) The building should be on or in the immediate vicinity of the agriculture land;
(b) It is occupied by the cultivator or receiver of rent or revenue
(c) It is used as a dwelling house or as a store house or other out house
In addition to the above condition any one of the following two conditions should also be
satisfied
i. The Land is assessed to land revenue/Local rate or
ii. It is situated in rural area.

7. Income derived from farm building required for agricultural operations:
ONLY IF IT IS:
• Situated in a rural area.
• In immediate vicinity of the land
• Used as store or dwelling house or other outing building(out house)
IN CONNECTION with such land by the cultivator or receiver of rent or revenue
What is a Rural area?
Ans : Land is subjected to a local rate or Land revenue
➢ If Yes: It is a rural Land
➢ If No: Whether land is situated in a specified area? Yes : It will be an Urban Land/Non-Rural area
SPECIFIED AREA for this purpose shall mean:
✓ Within the jurisdiction of a municipality/Cantonment board with a population of at least 10,000. or
✓ Within 2km from the local limits of the M/CB having a population of > 10,000 up to 1 Lac.
✓ Within 6km from the local limits of the M/CB having a population of > 1,00,000 up to 10 Lacs.
✓ Within 8 km from the local limits of the M/CB having a population of > 10 Lacs.

8. INCOME WHICH IS PARTIALLY AGRICULTURAL AND PARTIALLY NON AGRICULTURAL
(Business)
Rule Business Agriculture % Non-
Agriculture %
7A Manufacture of Rubber 65% 35%
7B(1) Sale of Coffee grown and cured by
seller
75% 25%
7B(1A) Sale of Coffee grown, cured, roasted,
Grounded by seller (with or without
chicory)
60% 40%
8 Growing and manufacturing tea in
India
60% 40%

9. CONCEPT OF TAXATION OF THE AGRICULTURE INCOME:
➢ Agriculture Income is totally exempt under the Act,
➢ But shall be included in the total income in case of certain assessee
➢ for the purpose of determining the rate of tax
➢ on the non-agriculture income known as partial integration of taxes.
➢ It is applicable to Individuals, HUF, AOP, BOI and Artificial Juridical Persons

10. Two conditions which need to satisfied for partial integration are:
1. The Net Agricultural Income should exceed Rs 5,000 p.a., AND
2. Non-Agricultural Income should exceed the BASIC EXEMPTION LIMIT (maximum
amount not chargeable to tax).
(i.e. Rs 500,000 for Very Senior Citizen, Rs 3,00,000 for Senior Citizens, Rs 2,50,000 for
all other individuals.)
It may be noted that aggregation provisions do not apply to company, firm, co-operative
society and local authority. The object of aggregating the net agricultural income with
non-agricultural income is to tax the non-agricultural income at higher rates.

11. Tax calculation in such cases is as follows:
Step 1: Add non-agricultural income with net agricultural income. Compute tax on the
aggregate amount.
Step 2: Add net agricultural income and the maximum exemption limit available to the
assessee (i.e.Rs2,50,000 /Rs3,00,000 /Rs500,000). Compute tax on the aggregate amount.
Step 3: Deduct the amount of income tax calculated in step 2 from the income tax
calculated in step 1
i.e. Step 1 – Step 2.
Step 4: The sum so arrived at shall be increased by Health & Education Cess @4%. [Deduct
Rebate u/s 87A before cess if applicable]
SAME STEPS APPLIES IF OPTED FOR SEC 115BAC (Calculate tax as per the rates mentioned
in sec 115BAC)

12. Mr. X, a resident, has provided the following particulars of his income for the P.Y. 2022-23
i. Income from PGBP –Rs 2,80,000
ii. Income from house property –Rs 5,00,000
iii. Agricultural Income –Rs 1,90,000
iv. Expenses incurred for earning above agricultural income -Rs1,20,000
Compute his tax liability assuming his age is 45 years
Solution: Computation of total income of Mr. X for the A.Y. 2022-23
Particulars Amount (Rs)
Income from PGBP 2,80,000
Income from house property 5,00,000
Net agricultural income [Rs1,90,000 – Rs
1,20,000]
Less: Exempt under section 10(1)
70,000
70,000 NIL
Gross Total Income
Less Deduction Chapter VIA
TOTAL INCOME
7,80,000
-
7,80,000

13. Computation of tax liability (age 45 years)
For the purpose of partial integration of taxes, Mr. X has satisfied both the conditions:
1. Net agricultural income exceeds Rs 5,000 p.a., and
2. Non agricultural income exceeds the basic exemption limit of Rs 2,50,000.
His tax liability is computed in the following manner:
Step 1: Rs 7,80,000 + Rs 70,000 = Rs 8,50,000.
Tax on Rs 8,50,000 = Rs 82,500
Step 2: Rs 70,000 + Rs 2,50,000 = Rs 3,20,000.
Tax on Rs 3,20,000 = Rs 3,500 (i.e. 5% of Rs 70,000)
Step 3 : Rs 82,500 – Rs 3,500 = Rs 79,000.
Step 4 : Total tax payable = Rs 79,000 + 4% of Rs 79,000 = Rs 82,160

14. Eg: Mr X aged has the following income
Non Agri income Rs 4.5 lacs
Agriculture income is Rs 1 lacs
Step 1: Tax Calculation on NAI + AI = Rs 4.5 + 1 = 5,50,000 @ slab rates = Rs 22,500
Step 2 Tax on AI + BEL = Rs 1 lac + Rs 2.5 Lac @ slab rates = Rs 5,000
TAX = Rs 17,500
Less Rebate u/s 87A Rs 12,500
Rs 5,000
Add Cess @ 4% Rs 200
Tax Liabilty Rs 5,200

15. Mr. B grows sugarcane and uses the same for the purpose of manufacturing sugar in his
factory. 30% of sugarcane produce is sold for Rs10 lacs, and the cost of cultivation of
such sugarcane is Rs 5 lacs. The cost of cultivation of the balance sugarcane (70%) is Rs
14 lacs and the market value of the same is Rs 22 lacs. After incurring Rs 1.5 lacs in the
manufacturing process on the balance sugarcane, the sugar was sold for Rs 25 lacs.
Compute B’s business income and agricultural income.
Soln:
Sugarcane: 30% sold (Rs 10 Lac – Rs 5 lac ) = Rs 5 L
70% self consumed (Mv – cost of cultivation) ie Rs 22 L – Rs 14 L = Rs 8 L
Agriculture Income Rs 13 L
Sugar Sold: Sale Rs 25 Lac
Less : Sugar cane MV Rs 22 lac
Less : Mfg Expenses Rs 1.5 lac
Business Income Rs 1.5 Lac