How is Agricultural income taxed?

Agricultural income is not taxable in India. Hence, taxpayers who have agricultural income as the only source of income are not required to file their Income-tax return. However, if the taxpayer is earning any other income besides agricultural income like salary, house rent, business income etc., then he is required to file his return for that financial year.

The procedure for taxation of taxpayers having agricultural plus other incomes is as follows-

Step 1- Agricultural income is added to other incomes of the taxpayer assuming that it is taxable income. Hence, total income is calculated.

Step 2- Tax on such total income is calculated as per slab rates.

Step 3- Agricultural income is added to the basic exemption limit of taxpayers. Tax is calculated again on such income.

Step 4- The difference between both the above taxes is the actual tax liability of the taxpayer. Education cess, the surcharge is added to this amount. And total tax payable is paid by taxpayers.

E.g. Mr Anand (age 30 years) owns a piece of land near Hyderabad. Half of the land is used by him for agricultural purposes while the other half is hired for commercial activities like marriage, functions etc. During F.Y. 2017-18, he earned Rs. 1,40,000/- as agricultural income and Rs. 4,12,000/- from commercial activities. What will be his tax liability for F.Y. 2017-18?

Ans.:- Computation of Total Income and tax payable of Mr Anand for F.Y. 2017-18 as follows

Hence the tax payable by Mr Anand for F.Y. 2017-18 is Rs. 16,377/-