The document discusses various types of assesses under the Income Tax Act of 1961. It defines an assessee and discusses normal assessees, representative assessees, deemed assessees, and assessees in default. It also explains the meaning of previous year and assessment year, and provides exceptions to the general rule that income of a previous year is taxable in the following assessment year. Finally, it lists five types of incomes that are fully exempted from taxation, including agricultural income.

1. Taxation assignment-1
Submitted to:
Shaik jakir hussain,
Associate professor,
Taxation,
Klubs.
Submitted by :
(Group–7)
Sonu Bhandari (14051011)
G.Harika (14051051)
Siddarth (14051028)
Pooja Dhoot (14051032)

2. Krishna (14051027)
Srikar (14051055)
1. Explain various types of assesses.
Meaning of ‘Assessee’ – Income Tax
As per Sec 2(7) of the Income Tax Act, 1961, unless the context otherwise requires, the term
“assessee” means a person by whom any tax or any other sum of money is payable under this
Act, and includes-
(a) Every person in respect of whom any proceeding under this Act has been taken for the
assessment of his income or assessment of fringe benefits (or) of the income of any other
person in respect of which he is assessable, or of the loss sustained by him or by such other
person, or of the amount of refund due to him or to such other person
(b) Every person who is deemed to be an assessee under any provision of this Act
(c) Every person who is deemed to be an assessee in default under any provision of this Act.
Normally the term ‘Assessee’ is considered as one who is supposed to pay tax under Income
Tax. However, its advisable to understand complete meaning of the term as envisaged under
the Income Tax Act, as above.
To better understand the term assessee based on above definition, we need to understand the
following as well:
(a). Normal Assessee
 any person against whom proceedings under Income Tax Act are going on, irrespective of the
fact whether any tax or other amount is payable by him or not;
 any person who has sustained loss and filed return of loss u/s 139(3);
 any person by whom some amount of interest, tax or penalty is payable under this Act;
 any person who is entitled to refund of tax under this Act.
(b). Representative Assessee
A person may not be liable only for his own income or loss but he may also be liable for the
income or loss of other persons e.g. agent of a non-resident, guardian of minor or lunatic etc.
In such cases, the person responsible for the assessment of income of such person is called
representative assesses. Such person is deemed to be an assessee.
(c). Deemed Assessee
 In case of a deceased person who dies after writing his will the executors of the property of
deceased are deemed as assessee.

3.  In case a person dies intestate (without writing his will) his eldest son or other legal heirs are
deemed as assessee.
 In case of a minor, lunatic or idiot having income taxable under Income-tax Act, their
guardian is deemed as assessee.
 In case of a non-resident having income in India, any person acting on his behalf is deemed
as assessee.
(d). Assessee-in-default
A person is deemed to be an assessee-in-default if he fails to fulfill his statutory obligations.
In case of an employer paying salary or a person who is paying interest, it is their duty to
deduct tax at source and deposit the amount of tax so collected in Government treasury. If he
fails to deduct tax at source or deducts tax but does not deposit it in the treasury, he is known
as assessee-in-default.
2. Explain the meaning of previous year and assessment year?
Assessment Year (AY),financial Year (FY), and Previous Year (PY) are the terms very
commonly heard before 31st July and 30th September, being the last date for filing your
income tax returns for individuals and companies respectively. It is important to
understand assessment year meaning as per Income Tax because it is the word which is
widely used in all the form to be filed with the Income Tax department
Assessment Year
Assessment Year (AY) is defined in section 2 (9) of Income Tax Act, 1961 as a year in which
income of an assessee of the previous year/last year needed to be assessed. It is called as “tax
year” in some of the countries. Assessment Year (AY) is Date wise, both Assessment Year
(AY) and Financial Year (FY) is a period of twelve months starting from April 1st and
ending on March 31st. The activity done and refer to in these twelve months helps to refer to
them as Financial Year (FY) or Assessment Year (AY).
If you are still unable to understand what is assessment year, then, Assessment Year
definition says the year in which the assessment and filing of the assessee income is done
where a financial Year (FY) indicates the year in which the financial information of the
assessee gets reported to the government.
Previous Year
Previous Year (PY) as per section 3 of Income Tax Act, 1961 is said to be a year in which
income is earned to be taxed exactly in the immediately next/following assessment year. It is
also known as “income year” in some of the countries.
For Example – The income accrued in FY 2013-2014 its Assessment Year (AY) is 2014-
2015. So, Financial Year (FY) is the Previous Year (PY) while Assessment Year (AY) is the
Current Year (CY) in which the income is being assessed earned in Previous Year (PY). In
the Assessment Year (AY) your total tax liability for the income earned in the previous

4. financial year is evaluated and computed. Therefore, tax for the income earned in the
Previous Year (PY) is paid in the Current Year (CY).
Assessment year will always be of twelve months starting from april, 1st and ending on
march, 31st but previous year for a newly setup business or profession will be the period
commencing from the date of setting up the business or profession or the date on which the
source of income newly comes into existence and ending on the immediately following
march, 31st.
The concepts of assessment year and previous year are widely used while calculating section
80c deductions in India and calculating long term capital gains under sec 54 and calculating
true value of TDS in India.
Income of the Previous Year (PY) is not taxable in the immediately following Assessment
Year (AY).
The exceptions are :
(a) Shipping business of Non- Resident (Sec 172)
(b) Persons leaving from our country India either permanently or for a long period of time
(Sec 174)
(c) AOP/BOI/Artificial Judicial Person formed for a particular event or purpose (Sec174A)
(d) Person who tries to alienate his assets with a view to avoiding payment of taxes (Sec 175)
(e) Income of discontinued business (Sec 176).
3. “The income of one year is taxable in next year”. Explain the
exceptions to this rule
Previous year: Section 2(34) means the year immediately preceeding to assessment year.
Income for the previous year is always taxed in the assessment year. The following are the
exceptions to the general rule that income of every previous year is chargeable to tax in the
relevant assessment year.
• Section 172: Shipping business of a non-resident;
The provisions of this section shall, notwithstanding anything contained
in the other provisions of this Act, apply for the purpose of the levy and recovery of
tax in the case of any ship, belonging to or chartered by a non-resident, which carries
passengers, livestock, mail or goods shipped at a port in India unless the Income-tax
Officer is satisfied that there is an agent of the non-resident from whom the tax will be
recoverable under the other provisions of this Act.
• Section 174: Person leaving India;
Notwithstanding anything contained in section 4, when it appears to the
Income-tax Officer that any individual may leave India during the current assessment
year or shortly after its expiry and that he has no present intention of returning to
India, the total income of such individual for the period from the expiry of the

5. previous year for that assessment year up to the probable date of his departure from
India shall be chargeable to tax in that assessment year.
(2) The total income of each completed previous year or part of any previous year
included in such period shall be chargeable to tax at the rate or rates in force in than
assessment year, and separate assessments shall be made in respect of each such
completed previous year or part of any previous year.
• Section 174A: An AOP formed for the purpose of a particular event.
Section 174A. Notwithstanding anything contained in section 4, where
it appears to the Assessing Officer that any association of persons or a body of
individuals or an artificial juridical person, formed or established or incorporated for a
particular event or purpose is likely to be dissolved in the assessment year in which
such association of persons or a body of individuals or an artificial juridical person
was formed or established or incorporated or immediately after such assessment year,
the total INCOME of such association or body or juridical person for the period from
the expiry of the previous year for that assessment year up to the date of its
dissolution shall be chargeable to tax in that assessment year, and the provisions of
sub-sections (2) to (6) of section 174 shall, so far as may be, apply to any proceedings
in the case of any such person as they apply in the case of persons leaving India.
• Section 175: Persons likely to transfer property to avoid tax;
Notwithstanding anything contained in section 4, if it appears to the Income-tax
Officer during any current assessment year that any person is likely to charge, sell, transfer,
dispose of or other wise part with any of his assets with a view to avoiding payment of any
liability under the provisions of this Act, the total income of such person for the period from
the expiry of the previous year for that assessment year to the date when the Income-tax
Officer commences proceedings under this section shall be chargeable to tax in that
assessment year, and the provisions of sub-sections (2), (3), (4), (5) and (6) of section 174
shall, so far as may be, apply to any proceedings in the case of any such person as they apply
in the case of persons leaving India.
• Section 176: Discontinued business or profession
(1) Notwithstanding anything contained in section 4, where any business
or profession is discontinued in any assessment year, the income of the period from
the expiry of the previous year for that assessment year up to the date of such
discontinuance may, at the discretion of the 30[Assessing] Officer, be charged to tax
in that assessment year.
(2) The total income of each completed previous year or part of any previous year
included in such period shall be chargeable to tax at the rate or rates in force in that
assessment year, and separate assessments shall be made in respect of each such
completed previous year or part of any previous year

6. 4. Explain the residential status of a person
The determination of Residential Status of a person is very important for the purpose of levy
of income tax, as income tax is levied based on the residential status of a tax payer. The
Residential Status of a tax payer can be divided in the following categories Determination of
Residential Status of a tax payer is very important at the time of filing of income tax return as
income tax is levied based on the Residential status of the tax payer Determination of
Residential Status of Individual
The Residential Status of an Individual is to be determined on the basis of period of stay of
the taxpayer in India and is computed separately for each year.
If an individual satisfies any one of the following conditions, he is said to be Resident in
India for that financial year.
The conditions are:-
He is in India for a period of 182 days or more in that financial year
OR
He is in India for 60 days or more during that financial year and has been in India for 365
days OR
more during 4 previous years immediately preceding the relevant financial year.
If any one of the above conditions is satisfied, the individual is said to be resident in India.
However, if none of the conditions is satisfied, he is said to be a Non Resident Indian (NRI)
Exceptions to Residential Status
There are 2 exceptions to the above rule of classification of Residential Status:-
1. In case of an individual, who is a citizen of India and who leaves India in any financial
year for the purpose of employment outside India,
the 2nd condition stated above shall not be applicable and only the 1st condition of 182 days
or more would be applicable
2. In case of an individual who is a citizen of India or is a person of Indian origin and who
being outside India comes on a visit to India in any financial year, the 2nd conditions stated
above shall not be applicable and only the 1st condition of 182days or more would be
applicable.
Classification of Ordinary Resident & Non Ordinary Resident
As per Section 6(6), A person shall be not ordinary resident in India if he satisfies any one of
the following conditions:-
He has been a non-resident (in the manner computed above) in 9 out of 10 years immediately
preceding the Financial Year

7. OR
He has been in India for a period of 729 days or less in 7 previous years immediately
preceding the financial year.
If any 1 of the above conditions is satisfied, the person is said to be resident but not-ordinary
resident in India. However, if none of the above conditions is satisfied, the person is said to
be Resident and Ordinary Resident in India.
5. Explain the incidence of tax of a person
Meaning of Incidence:
The problem of the incidence of a tax is the problem of who pays it. Taxes are not always
borne by the people who pay them in the first instance. They are sometimes shifted on to
other people. They are sometimes shifted on to other people.
Incidence means the final resting place of a tax. The incidence is on the man’ who ultimately
bears the money burden of the tax.Impact and Incidence Distinguished. We may
distinguish between impact and incidence. The impact of the tax is on the person who pays it
in the first instance and the incidence is on the one who finally bears it.
If an excise duty is imposed on sugar, it is paidin the first instance by the sugar
manufacturers; the impact is on them. But the duty will be added to the price of the sugar
sold, which, through a series of transfers, will ultimately fall on the consumer of sugar.
The incidence is, therefore, on the final consumer.
Incidence is not shifting:
Shifting means the process of transfer, i.e., the passing of the tax from the one who first pays
it to the one who finally bears it. It is through this process of shifting that the incidence of a
tax comes finally to rest somewhere.
The process of shifting may be slow or may be only partially effective so that the burden of a
tax may not fall entirely on the person, who is intended to bear it.
Incidence and Effects:
The effect of a tax refers to incidental results of the tax. There are several consequences of
the imposition of tax which are quite distinct from the problem of incidence.
The imposition of an excise duty on sugar, we have can is shifted ultimately to the consumer
of sugar.
Importance of incidence:

8. The study of incidence is very-important. The tax system is not merely aimed at raising a
certain amount of revenue, but the aim is to raise it from these sections of the people who can
best bear the tax. The aim, in short, is to secure a just distribution of the tax burden.
This obviously cannot be done unless an effort is made to trace the incidence of each tax
levied by the State. We must know who pays it ultimately in order to find out whether it is
just to ask him to pay it, or whether the burden imposed on him is according to the ability of
the tax-payer or not.
6. Explain any five incomes that are fully exempted from tax.
Some of the important items of income, which are fully exempt from income tax and which
can be utilised by an assessee for the purpose of tax planning, are described below:
(A) Agricultural Income
Under the provisions of Section 10(1) of the Income Tax Act, agricultural income is fully
exempt from income tax. However, for individuals or HUFs when agricultural income is in
excess of Rs. 5,000, it is aggregated with the total income for the purposes of computing tax
on the total income in a manner, which results into "no" tax on agricultural income but an
increased income tax on the other income.
"Agricultural income" as per Section 2(1A) means:
(i) Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes;
(ii) Any income derived from such land by (i) agriculture i.e., by actual cultivation of land
and by means of certain basic operations in agriculture; or (ii) by the performance of some
agricultural process ordinarily employed by the cultivator, etc. to render the produce fit to be
taken to market; or (iii) by the sale of the produce in respect of which no other process other
than the one mentioned above has been employed; and
(iii) Any income derived from any building owned and occupied by the receiver of the rent or
revenue of any such land or kept by the cultivator or the receiver of rent-in-kind, of any land
in respect of which, any process as mentioned above is carried on, subject to certain
conditions about the building being on or in the vicinity of the land, etc.
(B) Receipts from HUF
Any sum received by an individual as a member of a Hindu Undivided Family, where the
said sum has been paid out of the income of the family, or, in the case of an impartibly estate,
where such sum has been paid out of the income of the estate belonging to the family, is

9. completely exempt from income tax in the hands of an individual member of the family
under Section 10(2).
(C) Share from a Partnership Firm
Under the provisions of Section 10(2A), in the case of a person being a partner of a firm,
which is separately assessed as such, his share in the total income of the firm is completely
exempt from income tax since AY 1993-94. For this purpose, the share of a partner in the
total income of a firm separately assessed as such would be an amount which bears to the
total income of the firm the same share as the amount of the share in the profits of the firm in
accordance with the partnership deed bears to such profits.
(D) Certain Incomes of a Non-Resident
Any income by way of interest (including premium on the redemption of such bonds) on such
securities or bonds, as the Central Government may notify in Official Gazette, is fully exempt
from tax. Similarly, the interest on moneys standing to the credit of persons resident outside
India in respect of a Non-Resident (External) Account in a bank is exempt under Section
10(4). The Finance Bill, 2005 has further confirmed this.
(E) Allowance for Foreign Service
Any allowances or perquisites paid or allowed as such outside India by the Government to a
citizen of India, rendering service outside India, are completely exempt from tax under
Section 10(7). This provision can be taken advantage of by the citizens of India who are in
government service so that they can accumulate tax-free perquisites and allowances received
outside India.
(F) Life Insurance Moneys
Under Section 10(10D), any sum received under a Life Insurance Policy (LIP), including the
sum allocated by way of bonus on such policy, other than u/s 80DDA or under a Keyman
Insurance Policy, or under an insurance policy issued on or after 1.4.2003 in respect of which
the premium payable for any of the years during the term of the policy exceeds 20% of the
actual capital sum assured, is fully exempt from tax. However, all moneys received on death
of the insured are fully exempt from tax Thus, generally moneys received from life insurance
policies whether from the Life Insurance Corporation or any other private insurance company
would be exempt from income tax.
7. Explain Any Five Incomes That Are Partly Exempted From
Income Tax .
Some of the important items of income, which are partly exempt from income tax and which
can be utilised by an assessee for the purpose of tax planning, are described below:

10. (a) CHIDREN EDUCATION
Income received for the expense of children’s education through salary by employer
is been partly exempted from the income tax.
Its been exempted upto 100 rupees per month per child ( max 2 children)
(b) CHILDREN HOSTEL EXPENSES
Income received for the expense of children’s hostel expenses through salary by
employer is been partly exempted from the income tax.
Its been exempted upto 300 rupees per month per child ( max 2 children)
(c) GRATUITY section 10(10)
Income received under the gratuity for the employees cover under the gratuity act is
been exempted partly with an specific amount of maximum 10 lakhs and 15/26 * last
drawn salary * number of year completed.
Employees not covered the act their exempted amount is 10 lakhs or ½ average salary
of 10 months * 10.
(d) PENSION
Income received from the basis of pension that to on the commuted based so its been
exempted upto 1/3 of the full value of pension under gratuity act and ½ of the full
value of pension not under gratuity.
(e) RETRENCHMENT COMPENSATION section 10(10b)
Income received on the basis of the head is been exempted upto the amount
determined under the industrial disputes act , 1947
Or the specific amount of 5 lakhs.
8. “The tax liability of a person depends upon his residential
status”. Discuss about this statement.
Residential status and taxation - Incidence of taxation varies with changes in the status of
residence of the tax-payer. It is important, therefore, to correctly ascertain the residential
status of the assessee before his tax liability is determined. Persons fall into the following
three categories according to residential status:
(i) Resident in India;
(ii) Not Ordinarily Resident in India; and
(iii) Not Resident in India (i.e., Non-residents).
The residential status must be determined with regard to the previous year in respect of a
source of income and not with regard to the assessment year. As the tax is levied on the

11. income of a particular previous year, the enquiry and determination of residential status
should be confined to the facts obtained in that previous year. Residential status of an
individual has to be determined with reference to his stay in India in each year and the
finding that he is "Resident" in one year would not mean that he is resident in the following
year also.
Resident in India - Tax liability - In the case of residents, all income of the previous year
derived from any source forms part of his total income, which :
(a) Is received or is deemed to be received in India by or on behalf of the assessee,
(b) Accrues or arises or is deemed to accrue or arise to him during such year, or
(c) Accrues or arises to him outside India during such year.
In other words his entire income - whether Indian or foreign - of that previous year is taxable
in India.
‘Not ordinarily resident’ - Tax liability - In the case of a person ‘not ordinarily resident’ in
India, the total income of the previous year includes all income from whatever sources
derived, which:
(a) Is received in India in such year by or on behalf of such person,
(b) Accrues or arises or is deemed to accrue or arise to him in India during such year, or
(c) Accrues or arises outside India during such year from a business controlled in or a
profession set up in India.
In brief, his foreign income of the previous year, not falling under (c) above, is not taxable in
India.
Note :- All income accruing or arising through or from :-
(i) Any business connection in India, or
(ii) Any property in India; or
(iii) Any asset or source of income in India, or
(iv) The transfer of capital asset situated in India shall be deemed to accrue or arise in
India.

12. Non-Resident-Tax liability - In the case of a non-resident, the total income of such person of
any previous year shall include all income from whatever source derived, which:
(a) Is received or deemed to be received in India in such year by or on behalf of such
person, or
(b) Accrues or arises or is deemed to accrue or arise to him in India during the year.
Thus, in the hands of person who is ‘Resident’ all income received by him or accruing to him
anywhere in the world, will be taxed. In the case of a ‘Not Ordinarily Resident’ person, only
the Indian income will be taxable. The foreign income will not be taxable unless it is relatable
to a business controlled in India or a profession which was set up in India. In the case of a
‘Non-resident’ his Indian income alone will be taxable. The foreign income of a ‘Non-
resident’ is not taxable in India.
9. Explain the definitions of Agricultural Income.
Agricultural Income [Sec 10(1)]
As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax.
Agricultural income is defined under section 2(1A) of the Income-tax Act
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 sec 2(1A).
Any income derived from saplings or seedlings grown in a nursery shall be deemed to be
agricultural income.
Agriculture is a backbone of Indian economy and it is a state subject. Even though it is totally
exempted from tax under Sec.10 (1) of the Income tax act of 1961, it is taken in to account
for the tax calculation in certain class of Assessee.
Definition of agriculture income
Sec2 (1A) of the Act defines agriculture income as,
1. Any rent or revenue derived from land that is situated in India and is used for agricultural
purpose.
2. Any income derived from such land by-

13. a) Agriculture, or
b) Any process ordinarily employed by a cultivator or receiver of rent in kind to make the
produce fit to be taken to MARKET, or
c) The sale by a cultivator or receiver of rent in kind of the produce in respect of which no
process has been performed other than a process of the nature described in the above
paragraph.
3. Any income derived from farmhouse.
Agricultural income is an income as any rent or revenue derived from agricultural land that is
situated in India and is used for agricultural purpose. Thus income from basic operation like
cultivation, growing crops etc and secondary operation like removal ,diggingetc can be
classified as agricultural income and is exempt from tax.
CRITERIA TO DETERMINE AGRICUTURE INCOME
1. Income derived from land.
2. land is used for agricultural purpose
3. land is situated in India
TYPES OF AGRICULTURAL INCOME
1. Rent or revenue from agricultural land, which is situated in India
2. income derived from agriculture
3. Income from any process used by the cultivator to render the agricultural product
marketable
4. Income from the sale of agricultural product raised or received as rent in kind
5. Income from building used for agriculture operation and is immediate vicinity of
agricultural land.
10. Define income from agriculture and show why it is exempted
from tax.
Agricultural income earned by a taxpayer in India is exempt under Section 10(1) of the
Income Tax Act, 1961. 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.

14. (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.
Meaning of Agricultural Income:
Section 2 (1A) of the Income Tax Act, 1961 defines “agricultural income” as an income
under the following three sources:
(i) Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes: The assessee will not be liable to pay tax on the rent or revenue arising
from agricultural land subject to the conditions
(a) The land should either be assessed to land revenue in India or be subject to a local rate
assessed and collected by officers of the Government.
(b) In instances where such a land revenue is not assessed or not subject to local rate, the land
should not be situated within the jurisdiction of a municipality (whether known as a
municipality, municipal corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board, and which has a population of more
than ten thousand (according to the last preceding census which has been published before
the first day of the previous year in which the sale of land takes place); or it should not be
situated:
more than 2kms. from the local limits of any municipality
or
cantonment board and which has a population of more than 10,000 but not exceeding
1,00,000
or
not being more than 6kms. from the local limits of any municipality or cantonment board and
which has a population of more than 1,00,000 but not exceeding 10,00,000;
or
not being more than 8kms. from the local limits of any municipality or cantonment board and
which has a population of more than 10,00,000.
(c) The revenue must not include any income arising out of transfer of such land.
Further, a direct nexus between the agricultural land and the receipt of income by way of rent
or revenue is essential. (For instance, a landlord could receive revenue from a tenant.)
(ii) Any income derived from such land by agricultural operations including processing of
agricultural produce, raised or received as rent in kind or any process ordinarily employed by
cultivator or receiver of rent-in-kind so as to render it fit for the MARKET, or sale of such
produce.
(iii) Any income derived from any building owned and occupied by the assessee, receiving
rent or revenue from the land, by carrying out agricultural operations: The building must be

15. on or in the immediate vicinity of the land. It must be used by the assesee as a dwelling house
or store-house or an out-building, in connection with the land.
Hence, we can consider income attributable to a farmhouse as an agricultural income, subject
to the above conditions. Normally, the annual value of a building is taxable as ‘income from
house property’. However, in the case of a farm house, the annual value would be deemed
agricultural income and thus, be exempt from tax.
In addition to the above, income derived from saplings or seedlings grown in nursery is also
considered as agricultural income.
In order to consider an income as agricultural income, certain points have to be kept in mind:
(i) Existence of a land.
(ii) Usage of land for agricultural operations: Agricultural operations means efforts
induced for the crop to sprout out of the land. The ambit of agricultural income covers
income from agricultural operations, which includes processes undertaken to make the
produce fit for sale in the MARKET. Both, rent or revenue from the agricultural land and
income earned by the cultivator or receiver by way of sale of produce are exempt from tax
only if agricultural operations are performed on the land.
(iii) Cultivation of Land is a must: Some measure of cultivation is necessary for land to
have been used for agricultural purposes. The ambit of agriculture covers all land produce
like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands.
However, the breeding of livestock, aqua culture, dairy farming, and poultry farming on
agricultural land cannot be construed as agricultural operations.
(iv) Ownership of Land is not essential: In the case of rent or revenue, it is essential that the
assessee has an interest in the land (as an owner or a mortgagee) to be eligible for tax-free
income. However, in the case of agricultural operations, it is not necessary that the cultivator
be the owner of the land. He could be a tenant or a sub-tenant. In other words, all tillers of
land are agriculturists and enjoy exemption from tax. In certain cases, further processes may
be necessary to make a commodity MARKETABLE out of agricultural produce. The sales
proceeds in such cases are considered agricultural income because the producer’s final
objective is to sell his products.

16. ***Thank you***