agricultural land definition income tax act

The mere fact that an activity has some connection with or is in some way dependent on land is not sufficient to bring it within the scope of the term and such extension of the term agriculture is unwarranted. Agricultural land is not a capital asset under the definition of capital assets as defined in the Income TAx Act. ITR Filing: Do you need to disclose profits from the sale of 2. Rent or revenue derived from Indian land used for agricultural purposes. Pg. The principle to be derived from a consideration of the terms of the Income Tax Act is that where an assessee receives income, not itself of a character to fall within the definition of agricultural income contained in the Act, such income does not assume the character of agricultural income, by reason of the source from which it is derived, or the method by which it is calculated. They must make sure that they aggregate agricultural income with their total income to avoid interest payments and possible penalties for concealment of income. http://www.taxmanagementindia.com/Site-Map/Income_Tax/detail_notification.asp?ID=22008, Circulars & Clarifications on Income Declaration Scheme, Abatement, Composition, Specified Valuation, Tariff / Basic Rate of Duty / Classification, Import Tariff / Basic Rate of Duty / Classification, CST (Registration And Turnover) Rules, 1957, Income Computation & Disclosure Standard (ICDS), Indian Accounting Standards (Ind AS) - 2015, Provisions of Companies Act, 1956 applicable to LLP, Limited Liability Partnership Rules, 2009, LLP (Winding up and Dissolution) Rules, 2012, Income computation & disclosure standards. 2,000 lakh crore, is over 20 times the countrys gross domestic product of over Rs. Urban Agricultural Land: An Urban Agricultural Land qualifies to be a capital asset, hence capital gains shall arise on sale or transfer of urban agricultural land. During this year FY 2020-21 I received Rs 8.0 lakhs from the sale of ancestral agriculture property in village ( Rural area). 3. The sales proceeds in such cases are considered agricultural income even though the producers final objective is to sell his products.[vi]. Such land should, of course, be assessed to land revenue in the country or be subject to a local rate. 2. Nature of capital gain like long term or short term will depend upon the no. 3. ||. Otherwise, there are thousands of individuals having tax free agri incomes in crores and as such there is no logic to apply this facility as blanket permit for one and all. c. It must have been used either by the assessee or his parents for agricultural purposes in at least two years immediately preceding the date on which the transfer of land took place. In other words such income shall be chargeable to tax under the head capital gain. It must have been used either by the assessee or his parents in the two years immediately preceding the date on which the transfer of land took place. The Income Tax Department appeals to taxpayers NOT to respond to such e-mails and NOT to share information relating to their credit card, bank and other financial accounts. So I may loose around Rs4.5 lakhs. Utah Farmland Assessment Act - Utah State University Extension If by the test above, the land is agricultural land, it will not form part of the definition of a capital asset and so there will be no capital gains on the sale of such land. The agricultural land should have been used for agricultural purposes. no. Definitions - Central Board of Direct Taxes [xi]http://taxguru.in/income-tax/income-tax-treatment-taxability-of-agricultural-income.htmlas accessed on 25th Oct, 14. It was the case of the assessee that had it not been for the vegetation, there would not have been any occasion for the producers to shoot films in the garden and, it was because of that, that the income earned from those shooting charges amounted to agricultural income. Therefore 40% of the income of the Tea companies was taxed as income from the manufacture and sale of tea and 60% of such income was exempt from tax as agricultural income. Thanks for this useful info. Definition - Central Board of Direct Taxes Whether agriculture activity on urban land is exempt: Agriculture activity carried out on agriculture land whether it is rural or urban is exempt from tax hence profit from agricultural operation carried out at urban land is exempt from tax. For adding to the agricultural income for rate purpose, following two conditions be fulfilled. 9447 dated 06/01/1994 for notified area. Members || The provision under Section 54B of the Income Tax Act has a limitation that it does not permit the purchase of agricultural land before the date of transfer of the original asset, unlike Section 54 and 54F which allow exemptions for the purchase of residential houses before or after the transfer of the original asset. If receipts of sale of agricultural exceeds threshold amount whether tax audit is required in this case and if tax audit is not carried out than whether penalty can be levied for not obtained of tax audit report. 4. One Year: Since all such type of fruits is extracted from trees which have long gestation period means trees were planted on the land before it is taken on lease but it requires various subsequent operations which tantamount to agriculture operation hence if the land is agricultural land than profit on sale of fruits can be claimed as exempt even though land is taken on short term lease. 2014-15) Back. The Supreme Court then went on to hold that the mere fact that an activity has some connection with or is in some way dependent on land is not sufficient to bring it within the scope of the term agriculture. At present this limit is Rs 2,50,000/-. Maintained by V2Technosys.com, Taxability on Sale of Agriculture Land under Income Tax Law, Admission of claim barred by limitation under IBC, GST on legal services provided by Individual Advocate, Senior Advocate and Partnership Firm of Advocates. An official website of the United States Government. Sections 2(2) and 2(13) The guideline value is only 10% of the market value. The last date to file ITR is July 31, today. The nexus, as claimed by the assessee, was non-existent, far-fetched and illusory. ), Dated: 30.06.2023, Notification No. Page 1 . Whether Income from export of agriculture produce is exempt: If he agriculturist had directly export the agriculture produce than profit on export shall be exempt from tax provided other condition as mentioned in section 2(1A) is also satisfied but if any middlemen has undertaken export of agriculture produce than the same shall not be exempt under section 10(1) being agricultural income. http://www.lawnotes.in/Section_2_of_Income-Tax_Act,_1961, http://finotax.com/income-tax/info/exempt-income, http://yourfinancebook.com/definition-of-agricultural-income/, http://taxguru.in/income-tax/income-tax-treatment-taxability-of-agricultural-income.html, http://indiantaxguide.wordpress.com/2009/05/08/agricultural-income/, http://taxadviceindiacom.blogspot.in/2012/10/case-laws-on-sec-2ia-agricultural-income.html, http://www.taxmanagementindia.com/tax-updates/?p=23441. It is a landmark case for the understanding of agriculture under the Income Tax Act. Such land should be an Urban Agricultural Land. If the land is held as stock in trade then the sale of such lands results in business income.Whereas, if the land is held as investment then the income on the sale of the land results in Capital Gain. How will the ITD view if I registered the property at guideline value but received the market value under a sale agreement? (c) The difference between (a) and (b) is the amount of tax payable by the assessee. The median price of Utah ranches, farms, hunting land and other rural land and acreage for sale Such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India. Such building should be on land which is being used for agricultural purpose or should be situated on the immediate vicinity of such land but in such a situation such land should be either assessed to land revenue or should be situated outside the specified kilometer to the municipal area having population more than ten thousand as per last census etc then only income shall be classified as agricultural income. Generally, it is understood that agricultural income is exempt from tax and no income tax is payable on agricultural income but it is not as rosy as it is generally think. The net agricultural income should exceed Rs. However, there are hundreds of thousands of middlemen like wholesalers, retailers, distributors, etc. The resultant items through basic operation should be in a shape of products either for consumption or trade. Discussion on various situation/activities: There are various activities/situation wherein it is frequently discussion is taken place whether these activities will be considered as agricultural income or not and consequent exemption from income tax is available in these situation: A few of such activities are as under: 1. It looks like your browser does not have JavaScript enabled. Definition of rural agriculture land [xv], In Maharaj Kumar Gopal Saran Narain Singh v. CIT[xvi]. In that case should I reflect in ITR-2 ? 88D. Relevant portion of GN on tax Audit is as under: An agriculturist, who does not have any income under the head Profits and gains of business or profession chargeable to tax under the Act and who is not required to file any return under the said Act, need not get his accounts audited for purposes of section 44AB even though his total sales of agricultural products may exceed the prescribed limit. Land situated within jurisdiction of municipality or cantonment board. However, as done in case of senior citizens and super senior citizens, agri income should also have benefits of such slabs. A shareholder does not receive profit directly from the land, though the company may be involved in agricultural activities and is not entitled to exemption. Other taxable income exceeds the threshold limit who is require to pay tax. Whether Profit on sale of fruits from the trees planted around the house/Bunglow is exempt being agricultural activity: As per section 2(1A) any income derived from agriculture on the land which is used for agricultural purposewill be considered as agricultural income for the purpose of Income tax Act. Section VII.I . 2013-14) TAX INFORMATION AND SERVICES. Rent or revenue should be derived from land (may be in cash or kind). 6. When such soil is placed on trays, it does not cease to be land and when operations are carried out on this soil, it would be agricultural activity carried upon land itself. Thanks sir. (v) In order to assess the income of farmhouse as agricultural income, the farmhouse building must be situated on the land itself only and is used as a storehouse/dwelling house. Explanation- For the purposes of this sub-clause, population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year., (a) If situated in any area which is comprised within the jurisdiction of a municipality and its population is less than 10,000, or, (b) If situated outside the limits of municipality, then situated at a distance measured-, (i) more than 2 kms, from local limits of municipality and which has a population of more than 10,000 but not exceeding 1,00,000; or, (ii) more than 6 kms, from local limits of municipality and which has a population of more than 1,00,000 but not exceeding 10,00,000; or. Applying the aforesaid principles, the Madras High Court held in Nagi Reddis case that income earned by the assessee by way of shooting-hire charges by permitting film producers to shoot their films in his garden was not agricultural income. Income Tax have various contentious issues despite being one of the oldest Law of the Land. The upper strata of the land is soil and this is cultured and made fit for production of crops, vegetables and fruits, etc., by enriching the soil. (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or TAX-FREE INCOMES - Central Board of Direct Taxes Our wonderful PC twisted it and States have lost their legitimate rights, it shows clearity and creativeness and also learning thanks, Your email address will not be published. Act Section 2(14) defines the term capital asset. Compulsory acquisition of land or building forming part of industrial undertaking (which was used for industrial purposes for at least 2 years before its acquisition). But what is the exact definition of agricultural land for this purpose. Interest on belated receipt of rent of land, building. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations, even though they are divorced from the basic operations can constitute agricultural operations by themselves. The product should have some utility either for consumption, for trade and commerce. If I sell some or all of the land, what will be my tax liability? Central Government Act. Taxability of income not derived from agricultural land: In our daily life, we used to come across various incomes which seems to be agricultural income but minute study suggests that unless until income is have direct linkage from agricultural land, such income can-not be treated as agricultural income. Any rent or revenue derived from land, which is situated in India and is used for agriculture purpose. Agriculture income is in excess of Rs 5,000/-, 2. It provides an inclusive definition of capital asset. 13. Whether dues to landowners under Collaboration Agreements can be treated as Operational Debt under IBC? TAX Resp Sir , I Have Agreculture Income Rs. The assessee claimed that those charges amounted to agricultural income as the said premises were used for agricultural activities also. In the case where soil is removed from the land and kept in various pots etc and subsequent operations are carried out in pots. Yes! Rs 1,00,000(1000000-900000), Growing & Manufacturing of coffee grown, cured, roasted and grounded. The portion of the credit used against the Now calculation of taxability of the above assesse will be as under: From the above example we can say that though agricultural income is marginally liable to tax if other income of the assesse other than agricultural income crosses the specified tax slab and tax on agricultural income shall also be charged under the tax rate in which he is falling but once assesse reaches maximum marginal rate slab than income tax on agricultural income remain stagnant and no additional income tax is payable. A bit of reading never hurts. They would be the basic operations and would require the expenditure of human skill and labour upon the land itself. All Rights Reserved. Say for example trashing of Rice, wheat, mustard, etc is part of agricultural operations only even though these activities are carried out on non-agricultural land or building. Exemption u/s 10(37) of the Act: Capital Gain arise on compulsory acquisition of agricultural land under any law shall also be exempt on following conditions: 1. If yes or not, how I will show this income in ITR 2. In case assessee is not able to purchase agricultural land before the date of furnishing of Income Tax Return u/s 139 the amount of capital gains must be deposited before the date of filing of return in any bank or institution specified according to the Capital Gains Account Scheme, 1988. This amount is only reflectd in form 26AS only, I have not received the same in my SBA/c.This bank is facing closure/revival. Section 2 (1A) of the Income Tax Act, 1961 considers three activities as the main source of agricultural income in India. My father had sold his one Acer agricultural land to the another party. The ambit of agriculture covers all land produce like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands. The sole purpose of such farmhouses should be for use as dwellings for the cultivators or use as storehouses. Annual payment for life to the assessee was not held to be agricultural income and therefore not exempt from tax where the annuity arose out of a transfer made by the assessee of a portion of his estate for discharging his debts and for obtaining an adequate income for his life. The land is assessed to land revenue or local rates or alternatively, the land is situated outside urban areas i.e. But in the case of tea, coffee, sugarcane where a major processing (change of very nature of the product) is being done, than income shall be bifurcate as agricultural and non-agricultural as per rule 7, 7A, 7B and 8 of the Income tax rule. 3. Further, the income from trees that have been cut and sold as timber is not considered agricultural income since there is no active involvement in operations like cultivation and soil treatment.[ix]. The profit from the sale of such processed products would have to be apportioned between agricultural income and business income. Other Provisions under the Income Tax Act: 1. Any type of capital gane on that mony required or no Please let me know Income Tax implications on incomes from farming & leasing as mentioned. In fact and truth dividend is derived from the investment made in the shares of the company and the foundation of it rests on the contractual relations between the company and the shareholder. It means sale of agricutural land is not liable to capital gain tax. (e) Interest on capital received by a partner from a firm engaged in agricultural operations. The shooting of films is an activity which has no nexus whatsoever with agricultural operations, or with the land, except that the shooting is done on land which may be or has been agricultural land yielding some agricultural income. The following types of income are How to Save Tax on Sale of Agricultural Land? - RERA Filing Like the people who receive passive agricultural income in the form of rent or revenue, the people who actually carry out agricultural operations are also eligible for tax-free agricultural income. Agricultural land is not a capital asset under the definition of capital assets as defined in the Income TAx Act. Updated Urban agricultural is a land located in specified location and used for agricultural purposes. (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;] Agricultural income as defined in the Act is obviously intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise. Or under which section I will gate tax relief pl guide me [Section 2(1A)(c)]. So to plug such and many other lacunae, this senseless provision needs to be rationalised. These figure is derived from the sample size of 7082 cases only audited by CAG during the period. The term agriculture cannot be dissociated from the primary significance thereof which is that of cultivation of the land and even though it can be extended in the manner stated before both in regard to the process of agriculture and the products which are raised upon the land, there is no warrant at all for extending it to all activities which have relation to the land or are in any way connected with the land. Although agricultural income is fully exempt from tax, the Finance Act, 1973, introduced a scheme whereby agricultural income is included with non-agricultural income in the case of non-corporate assessees who are liable to pay tax at specified slab rates. The building is used as a dwelling house or as a storehouse or other outbuilding. [iii]http://finotax.com/income-tax/info/exempt-income as accessed on 25th Oct, 14. 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