Q niustr ati.

on 1
State whethe r the followi ng income s from land situate d in India are agricu ltural incom es
or not:
(i) Income from interes t on arrears of rent payabl e in respec t of land used for
agricu ltural purpos es.
(ii) Income from the use of land for grazing .of cattle require d for agricu ltural purs~ ts.
(iii) Income from lease of land for grazing _of·cat tle require d for agricu ltural pursm ts.
(iv) Income from the sale offorest trees ofsponta neous growth on which some operat ions
for their preser vation and growth were perform ed.
(v) Income from interes t on a simple mortga ge of land used for agricu ltural purpos es.
(vi) Notion al incom e from a house situate d near the agricu ltural farm and owned and
occupi ed by the assesse e for the superv ision of the farm activit ies. The farm is
situate d in a village ten kilome tres from the city. No land reven-u e or local tax is
levied on this farm.
(vii) Income from agricu ltural land situate d in Pakist an.
(viii) Prize from the Govern ment on accoun t of higher yield.
(ix) Amoun t of compe nsation receive d from Insura nce Compa ny on accoun t of the loss
of crop due to flood.
"iolunon
INCOME TAX
-
{i) It is not an agn· ult . . . . .· ted ·th land but with
fail c ural mcome as 1t 1s not direct1y connec WI
ure to pay the -rent on time.
(ii) •
I 18 ·[CIT vs. Raja Bahadur Kamakhaya Narain Singh & Others (1948) 16 ITR 325 (PCI)J
t an agricultural income as it is an agricultural activity.
(iii) · .
I 18 . • [CIT vs. R.B. Raja Shamsherjang Bahadur (24 ITR =AIR 1953 All. 676))
t ~ agricultural income. It is immaterial whether the assessee used the land for
grazing of cattle or gives it on lease for the purpose.
(iv) . . • ·[P. Chellaiah Pillai vs. CIT (16 ITR 350))
18
It not an agricultural income as basic operations of cultivation have not been
pe~ormed. •.. _ • .. . (Maharaja ofKapurthala vs. CIT (18 ITR 7~ =AIR 1945 Oudh 35>1
1s· not an agricultural income as it is not derived from the land but from the
(v) It
mortgagor· • [CIT vs. Shri ~ameshwar Singh- Maharaia ofDarbhanga (2 ITR 107))
{vi) ~e land is ·situated in a non-urban area. Hence, whethe;land revenue has been
paid or not_ on the land, the notional income of.agn·cultural building-is exempt.
(vii) Agricultural. land is not situated in India, hence income. is not an agricultural
•
mcome.
(viii) It is not an agricultural income due to the following reasons :
(a) The income is not from the land; or .
(b) The income is not from the use of land for -agricultural purposes; or
(c) The income is not from the sale of agricultural produce.
(ix) . 1t·is an agricultural income. The compensation is-received on account of the loss of
agricultural income. . • '(CIT vs. B. Gupta _(Tea) Pvt. Ltd. (1969) 74 ITR 337 (Cal.)]
c:> nlustradon2
State with reasons whether the following are agricultural income :
(i) Income from the sale of replanted trees where the denuded parts of the forest are
replanted and subsequent operations in forestry are carried out.
(ii) Income from the sale of trees of.forest which are' of spontaneous growth and in relation
to which forestry operations alone are performed.
Solution
(i) It is agricultural income ~s th.ese trees are not of ~pontaneous growth but ha
replanted and subsequent operations m forestry were earned out. . :v,e been
. (CIT vs. Raja Benoy Ku
(ii)It is not an agricultural income as it is derived from the sale of trees ofm.arsahasRoy)
growth. Here there are no basic oper!1tions lil~e tilling of the soil, sowing and P;::;taneous
subsequent operations for conservation and improvement of such. trees •do not lllg._ The
agricultural activities. constitute
q mustr ation 3
From the following information compute net agricul tural income for the Assess ment Year
2024-2 5:
Lease rent received from lands given to tenants for agricul tural operati ons
Sale of agricul tural produce (Landlord's share)
'
48,000
30,000
Payme nt of govern ment tax on agricul tural lands - 6,000
Expens es on power, irrigati on, cess and farm labour
10,000
Purcha se of seeds
1,000
Tractor hire charges (for agricultui-al operati ons)
2,500
 e
So lut ion Co mp uta tio n of Ne t Ag ric ult ura l Inc om f
(fo r the As ses sm ~n t Ye ar 202 4-2 5)
48,,000
Le ase ren t 30,000
Sa le of agr icu ltu ral pro du ce 78 ,00 0

Les s : Ex pen ses :

(i) Ta x on ag ric ult ura l lan ds ._ . 60 00 '
10',-00 0
(ii) Po we r, irr iga tio n, ces s an d far m lab ou r
1,0 00
(iii ) Se eds 2,5 00 19 ,50 0
(iv ) Tr act or hir e ch arg es 581500-
Ne t A.griculttiral; Inc on ie
c> m11 stra tfon 4 - . .

Coi npu te net agri cult ural inco nie from~ cultivati<;>µ..:of.~and : • '
2,00 ,000
Sale proc eeds of·a gric ultu ral produce_.. :"~---- . .. -.:· ~. • • •
10,0 00
Dep reci atio n on equ ipin erit 25,0 00
Lab our cha rges 10,0 00
Cos t of seed s 5,00 0
Cos t of fert ilise rs 15,0 00
Elec trici ty cha rges on agri cult ure
0-1- -~~- -
Solu tion ,

Com puta tion of Net Agr icul tura l lnco m~

(for the Asse ssm ent Year 2024-25)

Sale Proc eeds of agri cult ural prod uce ' '
2,00 ,000
Less : Exp ense s :
Dep reci atio n 10,0 00
Lab our cha rges ,
,. 00
25'·0
>· 00
10·0
fl,,

Cos t of seed s
5',000
Cos t of fert ilise rs
15,000 65.000
Elec trici ty cha rges 1,35 ,000
Net Agr icul tura l Income
Q nlustration 5
From the following information compute Net Agricultural lnconie : .
(1) Income from Grain business (including the amount received ~ 38>000
from wheat produced_ at own agricultural land) ·
'
1,87,500
(2) Lease rent received from land given to tenants for agricultural operations 18,000
(3) Sale of agricultural produce 48,000
( 4) Payment of Government Land Revenue on Agricultural Land 6,000
(5) Expenses on power, irrigation aild farm labour 10,600
(6) Purchase of seeds,· fertilisers and .pesticides 7,500
(7) Tractor hire charges (for agricultural operations) 2,500
Solu tion -,-- -
Com put atio n of Net Agr icul tura l Inc ome
(for the Ass essm ent Yea r _2024-25)
Sale of own crop t '
Lea se ren t 38,0 00
Sale of agri cult ural pro duc e 18,0 00
48,0 00 1,0 4,0 00
 nses :
Land revenue 6 ,0 0 0
P o w e r , ir r ig a ti 1 0 ,6 0 0
o
S e e d s , f e r ti li s n a n d f a r m laboUI!
e r s a n d p e s ti c id 7,500
T r a c to r h i r e c es _2,500 2 6 ,6 0 0
harges
N e t Agricultura J7.s400
c:>- _ _'fl-I• 1 c.,...,.
f' = ln n A
l 1ncoroe -
 PA RT LY AGRICULTURAL INCOME
AND
PA RT LY NON-AGRICULTURAL IN
. So me tim es the re is composite incom CO ME
e, which is pa rti all y ag ric ult ura l an d pa rti all y no n-
ag nc ult ur: 91 . Fo r de ter mi nin g the no
n-a gri cul tur al income ch arg eab le to tax
of an y ag nc ult ur al pro du ce wh ich ha , the ma rk et ~~ ue
s be en rai sed by the ass ess ee an d wh ich
as a raw ma ter ial in su ch bu sin ess ha s be en uti liz ed
sha ll be deducted. No fur the r de du cti
res pe ct of the co st of cu ltiv ati on inc on sh all be ma de in
urr ed by the ass ess ee as a cu ltiv ato r.
For this purpos e, ~rke t value shall_ be deeme d to be :
(a) where the agricu ltural produ~ e 1s ordina rily sold in the marke t, the value calcul ated
according to the averag e pnce at which it has been so sold> during the releva nt
previous year; or . .
(b) where the agricu ltural produ ce is not ordina rily sold in the muke t the aggreg ate of
the following shall be its marke t value·: .
(i) the expen ses of cultiva tion; .
(ii) the land reven ue or rent paid ·ror_ t,i~ land on -which it was grown; and
(iii) the profit which in the opiniqn. of the· Assessing_ Officer is reason able.
 ~ ,sa,npkB .
(1) Profi~• from S{lgar Factories : Sugar fa~ries which produce sugar from sugarcane
grown on then- own f ~ are t eated aa partly ~gncultural income. Sugarcane is generally sold
in the market. Hence, ~ 0rder separate the agricultural income from the business income,
the averag_e market pnce of su? cane during the relevant. previous year shall be charged as
an expenditure and_ no no~ will be taken of the expenses of cultivating the sugarcane. The
income thus determmed will be the business incom~. . •
(2) Income from g,sowi~ and manufacturing of'fea :.Sixty per cent of the income derived
from the sale of tea grown and manufactured by the_: s~ller in India is deemed to be agricultural
income and the remaining forty per cent i_s taken· as· };>µsiness· income.
(3) Income from growing and man~fac~ring of centri,'fuged lates or cenes : Sixty five
per cent of the income derived from th_e sale of: centrifuged latex or cenex manufactured or
processed by seller from rubber grown by him in In<lia· is· deemed to he- agricultural income and
the remaining thirty-five per cent i~ taken- as bus~ess uicome.
(4) Income from growing and manufacturing of Coffee ·: •
(a) Seventy-five per cent of the income derived from the sale·of coffee grown and cured
by the seller in India is deemed to be agricultural 4lco~e and twenty-fi~e per cent is
taken as business income. .• •
(h) Sixty per cent of the income derived froJll the sale of coffee ~wn, cured, roasted ~d
grounded by the seller in India, with or without mixing of chicofY. or other flavo~g
ingredients are deemed to be agricultural income and the remammg forty per cent 1s
taken as business income. •
Q Illustration 7 • .• . . .
Mr. Tony had estates m Rubber , Te_a and Coffee. He derives income from them. He has also
8
nursery wherein h_e grows plants and _sells them: For the Previous Year ending 31.3.2024, he
furnishes the following particu lars of his sources of incom~ from estates and sale of plants : t'
(i) Manufacture of Rubber • ·.. • · . • • 5,08,000
. (ii) Manufa cture of Coffee grow~ ~d cured· .. ~... 3,50,008
(iii) Manufa cture of Tea. .• •_:_.-· .. , -~·:. ·,·... . . . 7,00,000
.. (iv) SaleofP lantsfro ~Nurse ry.··. ·' ·•J: ·.. ·-·..{:···:- . .:---.·;:: __>-···_., ·_. ·_ ._ • .1,00,00 0
You &re. request ed to co~put e the tax~ble ~c~m~. f~~ thf3_ As~es~m~ 1:1t Y ~ar 2024-25.
• • 0 LO - - • •• o
 Computa tion of Taiable income · •.. ·. ·, .. ~ · . . :: .• .
~

Solution • :•
•• (for.the Asse~snieni Y~qr 2024-25) · •• _:. ·_ .·. · • : .. ·. ·. ~ -~ :· ~
.' • (i) Manufac ture ofrubber '(35% of income.is treated.a s J;,usiness income) 1,75,000
(ii) Manufac ture of coffee grown arid cured {25%: of income is treated as
business income)· · . . · -·. · . • ·•. •-:·_.:·:.:.·_.·.-··_ ·.>-·>:--·.:.--~---:. --~ •. ·. ·_ ·:. · ·_., · - 87,500
(iii) Manufac ture of tea (40% of income is treated as business income) •. •. 2,80,008
(iv) Sale of plants from nursery is exempt (being agriCultural in.Come) - • '. •
.However, agricult ural income will _be.added ~n t~tal incom~ . • ,. = .. • • •

for computa tion of tax • ·• . •. •• •

Taxable Income 5,42,500
0 ·Aglicalt ural Income and Taz UabWty or Integrat ion of Agricult ural ln~•••e •n4
Non-agr icultura l Income for Income Taz Purpose s
Agricult ural income is totally exempt from liability to income tax. However , agricultu ral
income is a factor in determin ing the tax on the non-agri cultural income 9f an Individu al,
Hindu Undivide d Family, Associat ion of Persons and Body of Individu als whose total income
(excludin g agricultu ral income) exceeds the minimum taxable limit and the net agricultu ral
income exceeds f 5,000. • -
Chart Showing Computa tion of Income Tax of an Individu al
(Assesse e has Agricult ural Income)
Total Income • ••••••••••
Add : Agricult ural Income •••••••••••
Aggrega te Income •••••••••••
Tax on Aggrega te Income :
(A) Tax on income liable to tax at special rates :
(a) Casual income @ 30% •••••••••••
(b) Tax on STCG u/s lllA@ 15% •••••••••••
(c) Tax on LTCG@ 20%/10% •••••••••••
(B) Tax on balance of income •••••••••••
[Aggrega te income - Income in (A) at normal rates] •••••••••••
Less : Tax on Agricult ural income (Net Agricult ural income + .
f 2,50,000 /3,00,000 /5,00,000 at normal rates) •••••••••••
Less : Rebate u/s 87A ............
. Add : Surcharg e, if any •••••••••••
...... , ....
Add : Health and Educatio n Cess @ 4% •••••••••••
Tax Liability •••••••••••

Less : (i) Tax deducted at Source

(ii) Tax paid in advance
·••.•·······
......... ,.
Net Tax Payable or Refunda ble
,,,,,,,,,,
•••••••••••
.
Ro11nded off ......... ..
c:> niustratio n 10
Compute tax liability of Mr. X who has an ·agricultura l income of~ 80,000 and non-
agricultural income of~ 8,00,000.
Solution
Computatio n of Tax: Liability
(for the Assessment Year 2024-25)
Non-agricu ltural Income
Agricultura l Income
'
8,00,000
80,000
Aggregate Income 8,80,000
Tax on ? 2,50,000 Nil
Tax on Next? 2,50,000@ 5% 12,500
 Tax on Bala nce f 3,80, 000 @ 20% 76,00Q
88,500
4,0QQ
Less : Tax on f 2,50, 000 + 80,00 0 = f 3,30, 000 84,500
@ 4%
3,380
Add : Hea lth and Educ ation Cess Tax Liabi lity 87,1880
Q nlu.strati.on 11
year in Ind•~a, .aged 63 years, earned an agricultural income of f 30,000 during
X, a resident
the Previous
2023- 4 • Compute his tax liability assuming that he has non-agriculturaJ
income off 3,20,000.

Solution
Computation of Tax Liability of Se~or Citizen
(for the Assessment Year 2024-25)
Non-agriculatu ral Income
Add : Agricultural Income
'
3,20,000
30,000
Aggregate Income 3,50,000
Tax on f 3,50,000 :
On f 3,00,000 Nil
Next f 50,000@ 5% 2,500
2,500
Less : Tax on f 3,00,000 + 30,000 = 3,30,000
On f 3,00,000 Nil
Next f 30,000@ 5% 1,500 1,500
1,000
1,000
Less : Rebate u/s 87A Tax Liability Nil
~ ntustration 12
The income of ~n individual from business is t 6,20,000 and agricultural income is
~ 20,000 for the Previous Year 2023-24. Compute tax liability.

Solution
Computation of Tax Liability
~
(for the Assessment Year 2024-25) •
(A) Non-agricultural Income 6,20,000
Agricultural Income 20,000
Aggregate Income 6,40,000
Tax on~ 6,40,000 :
on t 2,50,000 Nil
on t 2,50,000@ 5% 12,500
on t 1,40,000@ 20% 28,000
(a) ~500
(B) Less : Tax on agricultural income :
Tax on exempted limit + Agricultural income
=
t 2,50,000 + 20,000 t 2,70,000 (b) 1,000
(C) Tax on Total income (a- b) 39,500
Add : Health and Education Cess @ 4% 1,580
Tax Liability 41,080
---
Q ntU$ tratfo n 13
In the follow ing cases comp ute tax liabil ity of an indiv idual resid ent
in India for the
,Assessment Year 2024 -25 :
(a) Total Incom e , 1,80, 000, Agric ultur al Incom e t 50,00 0
(b) Total Incom e , 4,30, 000, Agric ultur al Incom e f 4,000
(c) Total Inco me, 11,00 ,000, Agric ultur al Inco me, 15,00 0
Unab sorbe d Agri cultu ral Loss f 5,000 brou ght forw ard from the Asse ssme
nt Year
2023-24.
 zutwn
So Com puta tion of Tax Liab ility
(for the Asse ssm ent Year 2024-25)
No inco me tax is pay able as the tota l income does not exceed t 2,50 ,000
(a)
(b) Tota l Inco me ·
Add : Agr icul tura l Inco"QJ.e (It does not exceed f 5,00 0)
'
4,30 ,000
Nil
Total Income 4,30 ,000
Income tax on Tot al Inco me 9,000
)
Less : Rebate u/s 87A (T9t al inco me does not exceed f 5,00 ,000 9.000
Tax Liab ility Nil
(c) Tota l Inco me 11,0 0,00 0
Agr icul tura l Inco me
USs : Bro ugh t forw ard Agr icul tura l Loss
'
15,0 00
5,000
Net Agr icul tura l Inco me 10,000
Aggregate Income 11,1 0,00 0
1,45 ,500
Inco me tax on agg rega te Inco me
USs : Inco me tax on Agr icul tura l Inco me incr ease d by
f 2,50 ,000 , i.e., (10, 000 + 2,50,000) or, 2,60,000
OOil
c,
~co me tax on Tot al Inco me 11,00,000)
1,45 ,000
5,800
Add : Hea lth and Edu cati on Ces s @ 4% Tax Liab ility 1,50 ,800