Agriculture income is exempt from income tax, but is included in total income to determine the applicable tax rate for non-agricultural income. Agriculture income includes any rent or revenue from land used for agricultural purposes in India. It also includes income derived from agricultural processes performed on crops and the sale of crops that underwent these processes. Agriculture income exemption can only be claimed by land owners and cultivators. Integration of agriculture and non-agricultural income is done when non-agricultural income exceeds the basic exemption limit and agriculture income exceeds Rs. 5,000. Integration may result in additional tax liability if the total income falls in higher tax slabs.

1. Agriculture Income

2. Agriculture income
• It is exempt from income tax.
• But it is included in the TI of an assessee to determine
the rate of tax applicable on the non agricultural
income.
• Definition : 2(1A)
▫ Agriculture income means
a. Any rent or revenue derived from land which is situated
in India and used for agricultural purposes

3. Agriculture incomea.
b. Any income derived from such a land by
i. Agriculture or
ii. The performance by cultivator or receiver of rent
in kind, of any process ordinarily employed to
render the produce fit to the market.
iii. The sale by the cultivator of the produce raised
in respect of which the process has been
performed.
c. Any income derived from any building owned and
occupied by the receiver of the rent or revenue of
such land provided
i. The building is on the immediate vicinity of the
land.
ii. The land is either assessed to land revenue or
local tax

4. Essentials for Agriculture income
i. Land must be situated in India.
ii. Land must be used for agricultural purpose
iii. Only the owner or cultivator can enjoy the
exemption.
iv. Agriculture income include rent of land
v. Income from making the product fit for the market
is also agriculture income
vi. If the cultivator or receiver of rent sells the product
directly, the income from sale of such produce will
be agriculture income.

5. Partly Agriculture income
Growing and manufacturing Business
income
Agricultur
e income
Tea 40% 60%
Rubber 35% 65%
Coffee- grown & cured 25% 75%
Coffee- grown, cured, roasted and
grounded
40% 60%

6. Clubbing of Agriculture income with non
agricultural income
i. Though agricultural income is exempt from tax it is
integrated with non agriculture income in certain
cases for rate purposes. The process of agricultural
income with NAI is called integration.
ii. Integration is done when NAI exceeds the BEL and
AI exceeds 5,000/-. If the integrated income is in the
first slab, it will not have any additional tax liability
but if income is in the second or third slab,
integration will attract additional tax liability.

7. Steps for integration
i. Add AI with NAI
ii. Calculate tax on this total
iii. Agriculture income is added with BEL
iv. Compute tax on this total
v. Out of tax computed in step 2, tax computed in step
4 is deducted. This is the tax payable.