This Project explains the Partial Integration of both Agricultural and Non-Agricultural Income according to the Income Tax Act, 1961. Contributed by Yash Sakhuja, Harshit Kapoor, Manuj Kotnala and Kabir Seth of Kirori Mal College, University of Delhi Under the guidance of our professor D.R. Sameer Lama, Commerce Faculty, Kirori Mal College, University of Delhi. Published on: 19th October, 2020.

1. PARTIAL
INTEGRATION
Income Tax Assignment
By – Group 6
Created By: Yash Sakhuja, Kabir Seth, Harshit Kapoor and Manuj Kotnala

2. AGRICULTURAL
INCOME

3. AGRICULTURAL INCOME
Section 10(1) exempts agriculture income from income tax. By
virtue of section 2(1A) the expression “agriculture income” means:
⦁ Any rent or revenue derived from land which is situated in
India and is used for agriculture purpose [Sec 2(1A)(a)]
⦁ Any income derived from such land by agriculture
operations including processing of the agriculture produce so as to
render it fit for the market or sale of such produce. [Sec2(1A)(b)]
⦁ Any income attributable to a farm house subject to
satisfaction of certain conditions.[Sec 2(1A)(c)]
Source - Taxmann Publications: Income Tax University Edition by Dr. Vinod Singhania and Dr. Monica Singhania.

4. TAX TREATMENT OF INCOME WHICH IS
PARTIALLY AGRICULTURE AND PARTIALLY
FROM BUSINESS?

5. PARTIAL
INTEGRATION

6. PARTIAL INTEGRATION SCHEME
Section 10(1) of the Income Tax Act, 1961 states that
there is no tax on agricultural income.
However, if an assessee has non-agricultural income as
well as agricultural income, such agricultural income is
included in his total Income for the purpose of
computation of Income-tax on non-agricultural income.
This is also known as Partial integration of agricultural
income with non-agricultural income.
Source – www.cleartax.in

7. -D.R.K.N.RAJ
“In order to compute tax liability, both agricultural
and non agricultural income should be aggregated.
This is called partial integration.”

8. CONDITIONS OF PARTIAL INTEGRATION SCHEME
There are certain preconditions that need to be satisfied before
applying Partial Integration:
Condition 1: It is applicable only for Individuals, Hindu Undivided
Families (HUF’s), a body of Individual, an association of persons, or
an artificial judicial person. It is not applicable for corporate bodies
like firms, companies, co-operative societies, local authorities
Condition 2: The agricultural Income of the Taxpayer exceeds Rs.
5000
Agricultural Income > Rs. 5,000

9. Condition 3: The taxpayer has non-agricultural Income exceeding
the amount of exemption limit which is ₹5,00,000 for super
seniors(above 80 years of age), ₹3,00,000 for seniors(above 60
years but less than 80 years of age), and ₹2,50,000 for others(below
60 years of age).
Non-Agricultural Income > Exemption Slab
The exemption slabs according to the assessment year 2020-2021

10. COMPUTATION OF TAX
In case covered by the scheme, income tax will be computed for the
assessment year 2020-21 in the following manner:-
Step one: Net agricultural income is to be computed as if it were
income chargeable to income tax.
Step two: Agricultural and non-agricultural income of the
assessee will then be aggregated and income tax is calculated on
the aggregated income as if such aggregate income were the total
income.
Aggregated Income = Net Agricultural Income + Non Agricultural Income
Source – www.teachoo.com

11. Step three: The net agricultural income will then be increased
by the amount of exemption limit(i.e. The first slab of income on
which the tax is charged at nil rate) and income tax is calculated
on net agricultural income, so increased, as if such income was
the total income of the assessee.
Step four: The amount of the income tax determined at step 2
will be reduced by the amount of income tax determined under
step 3.
(Tax under Step 2)-(Tax under Step 3)
Net Agricultural Income + Exemption Limit

12. Step five: Find out the balance. Add education cess and
secondary and higher education cess.
Step six: The amount so arrived will be the total income
tax payable by the assessee.
Total Income Tax= Amount Under Step 4 + Education Cess
Education Cess = 4%

13. PROBLEM ON PARTIAL INTEGRATION SCHEME
For the Assessment year 2020-21, calculate the
Tax liability of Mr. Suresh (age 38 years) given the
following:
● Net agriculture income = Rs. 8,10,000
● Non-agricultural income = Rs. 4,78,300.
Mr Suresh pays Rs. 20,000 as life insurance premium
on the life of his son. (sum assured : Rs 3,00,000).
Source - Taxmann Publications: Income Tax University Edition by Dr. Vinod Singhania and Dr. Monica Singhania.

14. SOLUTION

15. SOLUTION

16. SOLUTION

17. CONCLUSION

18. CONCLUSION
Before the partial integration scheme, there was no clarity in the act as to
what should the tax liability of a assessee earning both agricultural and non
agricultural. The Raj Committee on Taxation of Agricultural Wealth and
Income recommended the scheme of partial integration to calculate the tax
liability in which both the country and the assessee are in benefit
The scheme is justified on the ground that it will (i) ensure that the tax
burden on assessee with similar income does not differ sharply merely
because of the fact that part of it is derived from agriculture; and (ii) curb
the temptation to dress up a large chunk of taxable income as income of
agricultural origin

19. THANKYOU