How to Compute Tax In Case You Have Agricultural Income?

While clubbing the agricultural income with non-agricultural income for tax purpose , whether non- agricultural income to be taken at gross income or net taxable income after deduction u/s. 80C ?Mahesh

The non-agricultural income is the total income without consideration of agricultural income. The total income is found out by gross total income minus deduction u/s 80C.

For example , for asst yr 2007-08 if an Individual male person has net agricultural income of R 40,000 and non agricultural income of Rs 2,00,000 . Let us say the person has deposited Rs 30,000 in PPF. In this case , the computation of tax will be as follows

Gross Total Income Rs 2,00,000
Less
Dedcution u/s 80C –deposit in PPF Rs 30,000
Total Income Rs 1,70,000
Computation of Tax
Tax on Rs 1,70,000 + Rs 40,000 (Rs 2,10,000) Rs 17,000
Less
Tax on agricultural income :
Rs 40,000 +Rs 1,00000 (exempt limit) Rs 4000
---------------
Rs 13,000

Add Education S.C 2 % 260
Tax payable 13,260

In nut shell, the non agricultural income is taken after reducing deduction under chapter VIA like 80C

Read More...

Summary only...

What Should I Do To Reduce Tax On Sale Of Agriculture Land?

I have sold an agriculture land which was bought by me in 1989 .I have sold it in June 2007.Is it compulsory that further investment can only be made in agriculture land or I can opt for house ,any commercial shop or can this capital gain can be used for any other business , some friends have advised me for RBI relief bonds NHAI bonds REC bonds for tax saving .princetiwari@.................com

Relax. First of all , check out if you have really agricultural land which is not defined as capital asset. Under I T Act , capital gains are chargeable to tax . However, capital gains arises only on sale or transfer of capital asset. The definition of capital asset is given in section 2(14) of the I T Act. It excludes "Agriculture land " provided the land is question fulfills certain conditions . The definition of capital asset is given below;

2(14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include

(i)...............

(ii)....................

(iii) agricultural land in India, not being land situate

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or

(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette^"

^{What the aforesaid conditions says in plain words is that an agricultural land is not a capital asset under Income Tax Act , if agricultural land is}

1. ^{situated in a municipality or cantonment area having population below 10 thousand or}
2. ^{situated beyond 8 Kms from municipality or cantonment area.}

^{So, if you find that your agricultural land is satisfying the aforesaid conditions , sale of such land is totally TAX FREE.}

 

^{However, in case  you do not fulfill the aforesaid conditions, the sale of such land shall result in long term capital gains on which you will have to pay tax . But there are exemption provided u/s section 54B ,54F and 54 EC which can be availed by you for reducing the tax or even exempting from payment of tax. For knowing more on section 54B read here . For section 54F click here and section 54EC read it here.}

Read More...

Summary only...

Is Agriculture Land Sale Taxable?

I had purchased agricultural land (can be termed ad farm-house plot) on the outskirt of Pune. The distance is approx. 7.5 kms from Pune muncipal corporation limit. I had purchased this land before 28 months.Now I want to sell this land. My questions are:

1. Is 36 months holding rule that is applicable to residential property will be applied to agriland?
   
2. The cost of purchase was 10 lacs and selling cost will be 40 lacs than how much capital gain i will have to pay if I sell this agriland?
   
3. Can the income be exempted from capital gain tax?
   

pune_hin@yahoo.co.in.

The capital gains is charged on capital assets sale. So first thing to determine is "whether the agriculture land , you have referred is Capital Asset or not?". Section 2(14) of the I t Act defines capital asset.The definition is as under:

"(14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include

(i) .......

(ii)

(iii) agricultural land in India, not being land situate

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or

(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette^."

<sup>As per your question the agriculture land is situated within 7.5 Kms , hence the land even if Agriculture is Capital Asset. Therefore the sale is taxble under the I t Act.

Yes, 36 months period is for this land to be taken as long Term Capital Gains.
Compute the capital gains by taking indexation benefit on cost of land.</sup>

Read More...

Summary only...