Agricultural Income Exemption & Partial Integration
Agricultural income up to ₹5,000/year is fully exempt without disclosure. Above ₹5,000, partial integration rule applies — added to total income for rate purposes, then agri-income basic exemption backed out to compute tax. Non-agri income above basic exemption is mandatory for integration to kick in.
- Section 10(1): fully exempt income
- Above ₹5,000: partial integration for rate calculation
- Must arise from land in India (not abroad)
- Rent/revenue from agri land + processing gains
- Farmhouse income taxable unless annual value nil under conditions
Definition
Agricultural Income
What is Agricultural Income?
Agricultural income up to ₹5,000/year is fully exempt without disclosure. Above ₹5,000, partial integration rule applies — added to total income for rate purposes, then agri-income basic exemption backed out to compute tax. Non-agri income above basic exemption is mandatory for integration to kick in.
Key rules to remember
- Section 10(1): fully exempt income
- Above ₹5,000: partial integration for rate calculation
- Must arise from land in India (not abroad)
- Rent/revenue from agri land + processing gains
- Farmhouse income taxable unless annual value nil under conditions
Worked example
Farmer with ₹1.8L agri income + ₹5L non-agri: partial integration — tax on ₹6.8L slab minus tax on (₹1.8L + basic exemption). Net effective tax approximately ₹8,500 vs zero if agri < ₹5,000.
Which ITR form applies
- ITR-2 — No upper limit
- ITR-3 — No upper limit
- ITR-4 (Sugam) — 44AD ₹3 Cr (digital) / 44ADA ₹75L / 44AE per vehicle
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