What is Agriculture Income under Section 2? What are the exceptions?
As Per Section 2(1A), the definition of Agriculture income as follows.
- By [Section 2(1A)(a)] Any rent or revenue derived from land which is situated in India and used for agriculture purpose only.
- As per [Section 2(1B)(b)] Any income derived from such land by agricultural operations including processing of the agricultural produce, raised or received as a rent-in-kind so as to render it fit for the market/sale of such produce.
- As per [Section 2(1A)(c)],
- Income attributable to a farm house subject to the condition that the building is situated on.
- Near the land and is used as a dwelling house, storehouse.
- Another outbuilding and the land is assessed to land revenue.
- The building is situated on or near land which (though not assessed to land revenue or local rate) is located rural area.
Under Section 10(1) agricultural income is exempted from taxation. The reason for the exemption for agricultural income from Central tax is that the Constitution gives exclusive power to make laws on taxes on agricultural income to the State Legislature. But in some of the cases, agricultural income is taken into consideration to determine the tax on non- agricultural income.
- From the Assessment year 2009-10, any income derived from saplings or seedlings grown in nursery shall be deemed to be an agricultural income.
What is Rural Area?
From the assessment year, (AY) 2014-15, Any area which is outside the jurisdiction of a municipality/cantonment board having a population of 10,000 or more is known as a Rural area.
The Rural area for the above purpose is as follows.
|2 kilometers from the local limits of municipality or cantonment board||If the population of the municipality or cantonment board is more than 10,000 but not more than 1 lakh.|
|6 kilometers(Km) from the local limits of municipality or cantonment board||If the population of the municipality or cantonment board is more than 1 lakh but not more than 10 lakh.|
|8 kilometers (Km) from the local limits of the municipality or cantonment board||If the population of the municipality or cantonment board is more than ten lakhs.|
FAQs on Sale of Agriculture land
Mr. Kim Soo Hyun gains Rs. 4,00,000/- on the sale of Agriculture land but he doesn’t invest in any other land. As per the [Section 54b], the asset can be purchased within a period of 2 years from the date of transfer. However, Mr. Kim Soo Hyun has to file Income Tax Return (ITR) not yet re-invested anywhere. So what are the possible ways of saving capital gain tax?
As per Section 2 Agricultural Land excludes from the definition of the capital asset subject to certain conditions. So, Mr. Kim Soo Hyun has like to check if the agriculture land is subject to capital gains. If it is accountable to tax, Mr. Kim has to deposit it in a Capital Gains Account Scheme before the due date of filing return.
If Mr. Kim Soo Hyun land is urban land, then there is no option to he must and should pay capital gain tax because of he does not invest in any property / not deposited in Capital gain scheme account within due date u/s 139(1). Otherwise, if his land is Rural agricultural land, then it is not a capital asset at all, and it is exempted from capital gain tax.
As per notification 9447, issued by the government, a list is given to municipal corporations or what it so called to treat it as the capital asset. If the agriculture land is not falling any municipality named in the notification by the government, in that case, Mr. Kim Soo Hyun can assume that the agriculture land is not a capital asset.