This presentation is brief description about how the agriculture income is taxable and whether it should be taxed indirectly....??

1. In India, which class or
group of people are not
liable to income tax ?
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2. HINT
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3. Whether not taxing people
from agricultural sector is right
or wrong ?
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4. AGRICULTURE INCOME:
SHOULD IT BE TAXED ?
By
- Radhey rathi
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5. PRESENT SCENARIO
Exempt under the Income Tax Act.
 Exclusive power given by the Constitution to
make laws in relation to taxes levied on
agricultural income.
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6. OTHER REASONS ( MAIN REASONS)
 India being a developing country, maximum number
of people in agricultural sector
 Main Vote bank for political parties
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7. REASONS FOR NOT TAXING AGRICULTURAL
INCOME
 Sector in bad shape
 Many farmers leaving this sector
 Suicides
 Unreliable weather
 Lower prices offered by middlemen and traders
 So, the government does not want to curse farmers
more by levying taxes on them.
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8. Do you all really believe that farmers
are in a bad condition ?
Do you feel that all farmers have to
struggle a lot to make both ends meet
?
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10. 10

11. REAL SCENARIO
 Large number of farmers are immensely rich.
 Evident from sale of 1500 luxurious cars like
Mercedes, Audi and BMW in Punjab ( an
agriculturally driven state)
 Hardworking salaried people and businessmen feel
depressed when they see that these rich farmers
are not liable to pay any income tax
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12. FOR/AGAINST TAXING THE AGRICULTURAL
INCOME
 India, a developing nation, hence large amount of
expenditure is required for proper development of
infrastructure.
 Suicides of farmers – not a point to be considered
here. Rather government should analyze the
reasons behind it.
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13.  A wrong belief that this will deplete funds and
resources available with poor farmers.
 As per the recent budget, income up to Rs.
2,50,000 is exempt from income tax.
 Hence, levying of income tax will not deplete funds
and resources of poor farmers. Only rich farmers
would be liable for income tax.
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14. ANOTHER BENEFIT TO FARMERS
 Income tax to be levied as per the land holding
pattern. Example –
 3 people in a farmer’s family. Assume land is
equally distributed in their name.
 So, income of Rs. 7,50,000 ( i.e. Rs. 2,50,000*3)
would be exempt.
 This is not the case with a salaried person with 2
members in the family.
 Hence, for a non-agricultural family, exemption limit
would be only Rs. 2,50,000.
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15. BENEFIT IF LIABILITY ARISES
 Farmers will start investment by way of PPF or
NSC, which has two benefits, namely :-
1. Such an amount can be claimed as deduction.
2. Habit of saving would be inculcated, which will
lead to bright future of farmers as well as of India
as a whole.
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16. HISTORY
 All agencies and commissions set up in last 65
years unanimously believe that there should be
income tax on agricultural income.
 Some eminent people who feel that Agricultural
income should be taxed :-
1. Dr. K N Raj, an eminent economist who served as
advisor to prime ministers like Pt. Jawaharlal
Nehru and P.V. Narasimha Rao.
2. Dr. Ambedkar
 Even Taxation enquiry Commission set up in
1953-54 was of the same view.
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17. WHAT IS AGRICULTURAL INCOME ?
 As per IT Act, any income from the following three
sources is considered as agricultural income :-
1. Any rent received from land which is used for
agricultural purpose.
2. Any other income derived from such land by
agricultural operations including processing of
agricultural produce.
3. Income attributable to a farm house ( subject to
some conditions as per Income Tax Act)
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18. PRE REQUISITE CONDITIONS
 The following conditions have to be sufficed in
order to consider an income to be an agricultural
income :-
1. There must be land.
2. The land is being used for agricultural purposes
3. Land cultivation is must
4. If rent is received, then to assess that rent income
as agricultural income, there should be agricultural
activities on that land.
5. Income of farm house is considered as agricultural
income only if farm house is built on that land and
it is used as a store house.
6. Ownership of land is not essential. 18

19. Is agricultural
income really not
taxed in India ?
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20. No, it is indirectly
taxed.
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21. INTEGRATION OF INCOMES
 If Agricultural Income > Rs. 5,000
Or
 If Non agricultural income > Rs. 2,50,000 (basic
exemption limit), then
 Follow the following steps to calculate total tax
liability
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22.  Step – 1 – Total Income = Agricultural income +
Non Agricultural Income
 Step – 2 – Calculate tax liability on Total income
(Step -1)
 Step – 3 – Add Basic exemption limit to the
agricultural income
 Step – 4 – Calculate tax liability on amount
calculated in Step – 3.
 Step – 5 – Deduct amount of tax calculated in Step
– 4 from tax liability as per Step – 2.
 Step – 6 – Add education cess and secondary and
higher secondary cess to it.
 Step – 7 – Total tax liability = Step – 5 + Step – 6
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23.  E.g. For the PY 2013-14, Mr. X has agricultural
income of Rs. 2,50,000 and salary income of Rs.
7,50,000.
 Here, Total income = Agricultural income + Non-agricultural
income
= Rs. 2,50,000+ 7,50,000
= Rs. 10,00,000
 Tax on total income = Rs. 2,00,000
 Agricultural income + Basic Exemption limit
= Rs. 2,50,000 + Rs. 2,50,000 = Rs. 5,00,000
Tax on Rs. 5,00,000 = Rs. 1,00,000 23

24.  Hence, tax liability = Rs. 2,00,000 – Rs.1,00,000
= Rs. 1,00,000
Add: Edu. Cess and S&H edu. Cess = Rs. 3,020
= Total Tax liability = Rs. 1,03020
Tax on only NON AGRICULTURAL income of Rs.
7,50,000
= Rs. 75,000
Indirect tax on agricultural income = Rs. 25,000
(Rs. 1,00,000 – Rs, 75,000)
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25. Why not tax agriculture
income directly ?
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26. Thank you 
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