How to Compute Income Tax on Agricultural Income? Under the Income Tax Act, 1961, agricultural income is exempt from tax as per Section 10(1). However, if a taxpayer earns both agricultural and non-agricultural income, the partial integration method is used to determine the applicable tax rate. WhenRead more
How to Compute Income Tax on Agricultural Income?
Under the Income Tax Act, 1961, agricultural income is exempt from tax as per Section 10(1). However, if a taxpayer earns both agricultural and non-agricultural income, the partial integration method is used to determine the applicable tax rate.
When is Agricultural Income Considered for Tax Computation?
The partial integration method applies only if:
✅ Agricultural income exceeds ₹5,000, AND
✅ Non-agricultural income exceeds the basic exemption limit (₹2,50,000 / ₹3,00,000 / ₹5,00,000 depending on age & category).
Step-by-Step Computation of Tax on Agricultural Income
Step 1: Compute Total Income
- Add non-agricultural income (salary, business income, rental income, etc.).
- Exclude pure agricultural income (income from farming, sale of produce, etc.).
Step 2: Apply the Partial Integration Method
Tax is computed in three parts:
| Step | Calculation |
|---|---|
| A | Compute tax on (Non-Agricultural Income + Agricultural Income). |
| B | Compute tax on (Agricultural Income + Basic Exemption Limit). |
| C | Final tax payable = A – B |
Step 3: Apply the Applicable Tax Rate & Add Cess
- Compute tax based on slab rates.
- Add 4% Health & Education Cess.
Example Calculation
Let’s assume a taxpayer has:
🔹 Non-Agricultural Income = ₹8,00,000
🔹 Agricultural Income = ₹3,00,000
Step A: Compute Tax on (₹8,00,000 + ₹3,00,000) = ₹11,00,000
- As per slab rates, tax = ₹1,32,000
Step B: Compute Tax on (₹3,00,000 + ₹2,50,000) = ₹5,50,000
- Tax on ₹5,50,000 = ₹22,500
Final Tax Calculation:
✅ Tax Payable = ₹1,32,000 – ₹22,500 = ₹1,09,500
✅ Add 4% Cess = ₹1,13,880
🔹 Total Tax Payable = ₹1,13,880
Key Points to Remember
✅ Agricultural income alone is tax-free, but it affects the tax rate on other income.
✅ Partial integration applies only if agricultural income > ₹5,000.
✅ Different exemption limits apply based on the taxpayer’s category (individual, senior citizen, etc.).
✅ Agricultural income from tea, rubber, and coffee plantations is partially taxable under Rule 7, 7A, and 7B.
What is a Belated Return under the Income Tax Act? A belated return under the Income Tax Act, 1961 refers to an Income Tax Return (ITR) that is filed after the due date under Section 139(1) but before the deadline allowed under Section 139(4). Time Limit for Filing a Belated Return (Section 139(4))Read more
What is a Belated Return under the Income Tax Act?
A belated return under the Income Tax Act, 1961 refers to an Income Tax Return (ITR) that is filed after the due date under Section 139(1) but before the deadline allowed under Section 139(4).
Time Limit for Filing a Belated Return (Section 139(4))
Consequences of Filing a Belated Return
1. Late Filing Fees under Section 234F
2. Interest on Unpaid Tax (Section 234A)
3. Loss of Carry Forward of Losses
4. Impact on Refunds
5. Higher Chances of Scrutiny or Notice
Can a Belated Return be Revised?
Yes! Under Section 139(5), you can revise a belated return before 31st December of the assessment year or before completion of assessment, whichever is earlier.
Recent Changes Post Budget 2025
If you miss the belated return deadline, you can file an updated return within 48 months, but additional tax liability applies.
Key Takeaways
✔ Always try to file your return before the due date to avoid penalties.
✔ If you miss it, file a belated return before 31st December of the next assessment year.
✔ Pay outstanding tax and interest while filing to avoid further penalties.
✔ Losses (except house property losses) cannot be carried forward if the return is belated.
Read:What are the consequences of late filing of return after due date or say late return?
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