There are some businesses that include some activities as agricultural and some as non-agricultural. However, the problem arises in taxation as to how much portion is to be treated as agriculture and how much as non-agriculture. Hence the Income-tax Act, 1961 has given some percentage where some part is treated as an agricultural business while rest shall be non-agricultural income. These businesses include the manufacturing of tea, coffee or rubber in India.
The bifurcation of agricultural and non-agricultural parts for each type of business is as follows:-
|Particulars of business||Agricultural (Exempt) portion||Non-agricultural (Taxable) portion|
|Growing & Manufacturing of tea||60%||40%|
|Growing & Manufacturing of rubber||65%||35%|
|Growing & Manufacturing of coffee||75%||25%|
|Growing & Manufacturing of coffee grown, cured, roasted and grounded||60%||40%|
E.g. :- Mr. Roy is an agriculturist. He is having agricultural land in Assam where he grows and manufactures tea. During the financial year 2020-21, he produced tea amounting to Rs. 12 crores. How much will be the taxable turnover for F.Y. 2020-21?
Ans. :- Income-tax Act has provided that 60% shall be exempt from tax out of total manufacturing of tea in India. Hence, out of Rs. 12 crores, the agricultural portion is Rs. 7.20 crores. And the taxable turnover of Mr Roy is Rs. 4.80 crores for the financial year 2020-21.