Agriculture continues to be the primary occupation in India despite the progress of secondary and tertiary sectors. The government tries to promote agriculture by giving various benefits. One of them is income tax benefits . Although practically exempt, agricultural income taxability is a little more layered. Here's a somewhat simpler breakdown.

Definition of agricultural income

Under Section 2(1A) of the Income Tax Act, agricultural income in India is defined as

What is not agricultural income?

Is any tax levied on agricultural income?

Under Section 10(1) of the Income Tax Act, agricultural income in India is not taxed. The Central Government does not impose taxes on agricultural income. But, agricultural income taxability is a slightly different matter as it is taken into account for rate calculation while assessing income tax payable under the following conditions.

• Net agricultural earnings of the previous year are more than ₹5000
• Total non-agricultural income is above the exemption limit ( Citizens aged less than 60 years: ₹2.5 lakhs, Citizens from 60-80 years: ₹3 lakhs, citizens aged 80+ years: ₹5 lakhs)

When these conditions are fulfilled, the income tax is computed as follows:

What about the sale of agricultural land?

Under Section 54B of the Income Tax Act, agricultural income in India from the sale of agricultural land is exempt from tax if the sale amount is used to buy any other agricultural land. Even for availing this benefit, certain conditions are to be fulfilled.

• The entity has to be an individual of a Hindu Undivided Family (HUF)
• The land must be utilised for agriculture by the person or their parents or any member of a HUF for minimum 2 years before the day when the sale of land happened.
• The purchase of another land should happen within 2 years after the day of sale of the previous land.
• In the event of acquisition of land under law, this period will begin from the day when compensation is received.