When it comes to agricultural income it is commonly believed that it is exempted. But you need to calculate it for finding income tax rate when partial integration of non-agricultural income with agricultural income conditions satisfied. So now let us look what are the conditions and how we can calculate agriculture income for taxation purpose.
The scheme of partial integration of non-agricultural income with agricultural income is applicable if the following three conditions are satisfied.
Condition 1-The taxpayer is an individual, a HUF, a body of individual, an association of persons or an artificial judicial person.
Condition 2-The taxpayer has non-agricultural income exceeding the amount of exemption limit (Current exemption limit is Rs.2,00,000 for tax payers who are below 60 yrs of age).
Condition 3- The agricultural income of the taxpayer exceeds Rs.5,000
If above said three conditions are satisfied then you need to consider your agriculture income too for finding in which slab of income tax rates you fall. I will show you how to do this calculation with simple example.
Mr.X is individual whose age is 45 yrs, his yearly income from his business is Rs.10,00,000 and his agriculture income is Rs.3,00,000. So in this case all the above three conditions are satisfied. Now we need to calculate by combining his agricultural income with non agriculture income to find his tax slab. Below is the Calculation method of Agriculture Income under Partial Integration scheme.
From the above table you found that eventhough agriculture income is considered as exempted under Section 10 (1) of Income Tax, still it is considered for finding tax payers taxability when the above three conditions are satisfied.