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Agricultural income Tax: In India, questions often arise regarding tax on farmers’ income. It is generally believed that agricultural income is tax free, but this is not the case in every situation. Know under which circumstances it may be necessary for farmers to file income tax returns.
Tax on income other than farming
If there is income from other business or job apart from farming, then the rules change. Tax is calculated by adding income outside farming to the total income. This is called partial integration of agricultural income. That means income outside farming can be taxed.
Different rules apply to professional farming.
If a person does contract farming or big corporate farming and his earnings are treated as business income, then tax will be levied. This happens when the farming activities are less and processing is more. In such cases, the income is considered as business income.
No tax on subsidy or grant received for farming
The subsidy received from the government or state government is completely tax free. It is exempted under section 10(1) of the Income Tax Act. Subsidy received on farming equipment or seeds is also included in this. This benefit is given to reduce the cost of farmers.
If the land is leased, then the rules will be different.
If the farmer earns by giving his land on rent, then this income will be considered as rental income, not agricultural income. In such a situation, it will come under the purview of income tax. That is, if you do not do farming, you will not get the benefit of exemption.
Rules are different on gardening and forest products.
Income is earned by selling wood or plant products from the forest. If it is earned naturally, then it will not be considered as agricultural income. Tax may have to be paid on this income. Only the income from gardening done through farming is exempted.
There is no tax on the income from agriculture.
The income from agriculture is exempted from income tax. This means that there is no tax on the income from agriculture. This exemption applies to the income earned by selling the produce of the farm. This provision has been made to provide financial relief to the farmers.
When is there a need to file ITR?
If the non-agricultural income is more than the basic exemption limit, then it may be mandatory for such a farmer to file ITR. Tax will be calculated by adding agricultural income. However, there is no tax on farming income.
It is important to keep documents and proofs.
Keep farm details and sales bills to show agricultural income. If the Income Tax Department asks for proof, these will come in handy. Especially when the farmer has income from other sources as well. Keeping the right documents can help avoid tax disputes.
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