How is agricultural income computed for tax purposes in India?

Answer 1

In India, agricultural income is computed based on the income derived from agricultural activities such as the cultivation of crops, the rearing of livestock, or the sale of produce. The computation involves deducting the cost of production from the total revenue generated. The costs include expenses like seeds, fertilizers, labor, machinery, irrigation, and land rent.

For tax purposes, agricultural income is considered non-taxable if it meets certain criteria. However, if the agricultural income exceeds ₹5 lakh in a financial year, it may affect the calculation of tax liability on non-agricultural income through the "aggregate income" principle, especially if the taxpayer's non-agricultural income exceeds the basic exemption limit. Income from activities like the sale of livestock, plantations, or non-agricultural land may be taxable, as well as income from agricultural land situated in urban areas. Agricultural income from outside India is generally not exempt from Indian tax.