Rules for Agricultural Income - Part IV of Finance Act 2010

Rules for computation of net agricultural income

Rule 1.—Agricultural income of the nature referred to in sub-clause (a) of clause (1A) of section 2 of the Income-tax Act shall be computed as if it were income chargeable to income-tax under that Act under the head “Income from other sources” and the provisions of sections 57 to 59 of that Act shall, so far as may be, apply accordingly:

Provided that sub-section (2) of section 58 shall apply subject to the modification that the reference to section 40A therein shall be construed as not including a reference to sub-sections (3) and (4) of section 40A.

Rule 2.—Agricultural income of the nature referred to in sub-clause (b) or sub-clause (c) of clause (1A) of section 2 of the Income-tax Act [other than income derived from any building required as a dwelling-house by the receiver of the rent or revenue of the cultivator or the receiver of rent-in-kind referred to in the said sub-clause (c)] shall be computed as if it were income chargeable to income-tax under that Act under the head “Profits and gains of business or profession” and the provisions of sections 30, 31, 32, 36, 37, 38, 40, 40A [other than sub-sections (3) and (4) thereof], 41, 43, 43A, 43B and 43C of the Income-tax Act shall, so far as may be, apply accordingly.

Rule 3.—Agricultural income of the nature referred to in sub-clause (c) of clause (1A) of section 2 of the Income-tax Act, being income derived from any building required as a dwelling-house by the receiver of the rent or revenue or the cultivator or the receiver of rent-in-kind referred to in the said sub-clause (c) shall be computed as if it were income chargeable to income-tax under that Act under the head “Income from house property” and the provisions of sections 23 to 27 of that Act shall, so far as may be, apply accordingly.

Rule 4.—Notwithstanding anything contained in any other provisions of these rules, in a case—

(a)    where the assessee derives income from sale of tea grown and manufactured by him in India, such income shall be computed in accordance with rule 8 of the Income-tax Rules, 1962, and sixty per cent of such income shall be regarded as the agricultural income of the assessee;

(b)    where the assessee derives income from sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, re-milled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed by him from rubber plants grown by him in India, such income shall be computed in accordance with rule 7A of the Income-tax Rules, 1962, and sixty-five per cent of such income shall be regarded as the agricultural income of the assessee;

(c)    where the assessee derives income from sale of coffee grown and manufactured by him in India, such income shall be computed in accordance with rule 7B of the Income-tax Rules, 1962, and sixty per cent or seventy-five per cent, as the case may be, of such income shall be regarded as the agricultural income of the assessee.

Rule 5.—Where the assessee is a member of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) which in the previous year has either no income chargeable to tax under the Income-tax Act or has total income not exceeding the maximum amount not chargeable to tax in the case of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) but has any agricultural income then, the agricultural income or loss of the association or body shall be computed in accordance with these rules and the share of the assessee in the agricultural income or loss so computed shall be regarded as the agricultural income or loss of the assessee.

Rule 6.—Where the result of the computation for the previous year in respect of any source of agricultural income is a loss, such loss shall be set off against the income of the assessee, if any, for that previous year from any other source of agricultural income:

Provided that where the assessee is a member of an association of persons or a body of individuals and the share of the assessee in the agricultural income of the association or body, as the case may be, is a loss, such loss shall not be set off against any income of the assessee from any other source of agricultural income.

Rule 7.—Any sum payable by the assessee on account of any tax levied by the State Government on the agricultural income shall be deducted in computing the agricultural income.

Rule 8.—

(1) Where the assessee has, in the previous year relevant to the assessment year commencing on the 1st day of April, 2010, any agricultural income and the net result of the computation of the agricultural income of the assessee for any one or more of the previous years relevant to the assessment years commencing on the 1st day of April, 2002 or the 1st day of April, 2003 or the 1st day of April, 2004 or the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009, is a loss, then, for the purposes of sub-section (2) of section 2 of this Act,—

(i)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2002, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2003 or the 1st day of April, 2004 or the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009,

(ii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2003, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2004 or the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009,

(iii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2004, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009,

(iv)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2005, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009,

(v)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2006, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009,

(vi)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2007, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2008 or the 1st day of April, 2009,

(vii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2008, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2009,

(viii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2009,

shall be set off against the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 2010.

(2) Where the assessee has, in the previous year relevant to the assessment year commencing on the 1st day of April, 2011, or, if by virtue of any provision of the Income-tax Act, income-tax is to be charged in respect of the income of a period other than the previous year, in such other period, any agricultural income and the net result of the computation of the agricultural income of the assessee for any one or more of the previous years relevant to the assessment years commencing on the 1st day of April, 2003 or the 1st day of April, 2004 or the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010, is a loss, then, for the purposes of sub-section (10) of section 2 of this Act,—

(i)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2003, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2004 or the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010,

(ii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2004, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2005 or the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010,

(iii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2005, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010,

(iv)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2006, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2007 or the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010,

(v)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2007, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2008 or the 1st day of April, 2009 or the 1st day of April, 2010,

(vi)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2008, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2009 or the 1st day of April, 2010,

(vii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2009, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 2010,

(viii)    the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 2010,

shall be set off against the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 2011.

(3) Where any person deriving any agricultural income from any source has been succeeded in such capacity by another person, otherwise than by inheritance, nothing in sub-rule (1) or sub-rule (2) shall entitle any person, other than the person incurring the loss, to have it set off under sub-rule (1) or, as the case may be, sub-rule (2).

(4) Notwithstanding anything contained in this rule, no loss which has not been determined by the Assessing Officer under the provisions of these rules or the rules contained in Part IV of the First Schedule to the Finance Act, 2002 (20 of 2002), or of the First Schedule to the Finance Act, 2003 (32 of 2003), or of the First Schedule to the Finance (No. 2) Act, 2004 (23 of 2004) or of the First Schedule to the Finance Act, 2005 (18 of 2005), or of the First Schedule to the Finance Act, 2006 (21 of 2006) or of the First Schedule to the Finance Act, 2007 (22 of 2007) or of the First Schedule to the Finance Act, 2008 (18 of 2008) or of the First Schedule to the Finance (No. 2) Act, 2009 (33 of 2009) shall be set off under sub-rule (1) or, as the case may be, sub-rule (2).

Rule 9.—Where the net result of the computation made in accordance with these rules is a loss, the loss so computed shall be ignored and the net agricultural income shall be deemed to be nil.

Rule 10.—The provisions of the Income-tax Act relating to procedure for assessment (including the provisions of section 288A relating to rounding off of income) shall, with the necessary modifications, apply in relation to the computation of the net agricultural income of the assessee as they apply in relation to the assessment of the total income.

Rule 11.—For the purposes of computing the net agricultural income of the assessee, the Assessing Officer shall have the same powers as he has under the Income-tax Act for the purposes of assessment of the total income.

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Agricultural Income A.Y. 2011-12

4[Section (1A)] “agricultural income”7 means8—

9[(a) any rent10 or revenue10 derived10 from land10 which is situated in India and is used for agricultural purposes;]

(b) any income derived from such land10 by—

(i) agriculture10; or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market10; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

9[Provided that—

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—

(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)

S. 2(1A) I.T. ACT, 1961 1.2

4. Renumbered as clause (1A) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.1-4-1989.

5. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.

6. See rules 7 and 8 for manner of computation of income which is partially agricultural and partially from business. See also rules 7A & 7B.

7. The Finance Act, 1973 introduced for the first time a scheme of partially integrated taxation of non-agricultural income with incomes derived from agriculture for the

purposes of determining the rate of income-tax that will apply to certain non-corporate assessees. The scheme is since continued by the Annual Finance Acts. The provisions

applicable for the assessment year 2010-11 are contained in section 2(2)/2(13)(c) and Part IV of the First Schedule to the Finance Act, 2010.

8. See also Circular No. 310, dated 29-7-1981 and Circular No. 5/2003, dated 22-5-2003. For details, see Taxmann’s Master Guide to Income-tax Act.

9. Substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962.

10. For meaning of the terms/expressions “rent”, “revenue”, “derived”, “revenue derived from land”, “such land”, “agriculture” and “market”, see Taxmann’s Direct Taxes Manual, Vol. 3.

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 Gazette11.]

12[13[Explanation 1.]—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.]

14[Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in subclause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under subclause (a) or sub-clause (b) shall not be agricultural income.]

15[Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income;]

DDT, 2010

DIVIDEND DISTRIBUTION TAX

1. Dividend distributed by an Indian Company is exempt from income-tax in the hands of many shareholders.

2. The Indian Company is liable to pay Dividend Distribution Tax (DDT) @ 16.609 percent (i.e. inclusive of surcharge and education cess) on such dividends.

3. The amount of dividend declared by the parent company (i.e. holding more than 50 percent of capital) is likely to be reduced by the amount of dividend received from its subsidiary company for the purposes of computing DDT payable by the parent company if:

-     such dividend is received from its subsidiary

-     the subsidiary has paid DDT on such dividend; and

-     the parent company is not a subsidiary of any other company 

Further, dividend paid to any person for and on behalf of New Pension System Trust is likely to be reduced. 

• Income received by unit holders from a Mutual Fund is exempt from income-tax. The Mutual Fund (other than equity oriented mutual fund) is likely to pay income distribution tax of:

-    27.681 percent (inclusive of surcharge and education cess) on income distributed by a money market mutual fund or a liquid fund

- 13.841 percent (inclusive of surcharge and education cess) on income distributed to any person being an individual or a Hindu Undivided Family by a fund other than a money market mutual fund or a liquid fund; and

- 22.145 percent (inclusive of surcharge and education cess) on income distributed to any other person by a fund other than a money market mutual fund or a liquid fund.

SST, 2010

E. Securities Transaction Tax (STT) A.Y. 2011-12:

Transaction	Rates	Payable By
Purchase/Sale of equity shares, units of equity oriented mutual fund (delivery based)	0.125%	Purchaser / Seller
Sale of equity shares, units of equity oriented mutual fund (non–delivery based)	0.025%	Seller
Sale of an option in securities	0.017%	Seller
Sale of an option in securities, where option is exercised	0.125%	Purchaser
Sale of a futures in securities	0.017%	Seller
Sale of unit of an equity oriented fund to the Mutual Fund	0.025%	Seller

Capital Gain Tax, A.Y. 2011-12

Capital Gains (CG) Tax:

Particulars	STCG Tax Rate (excluding SC, ES & HES)	LTCG Tax Rate (excluding SC, ES & HES)
Sale transactions of equity shares / unit of an equity oriented fund on or after 1-10-2004 and which attract STT	15%    U/S 111A	Nil U/S 10(38)
Sale transaction other than mentioned above: u/s 112
Individuals (resident and non-residents)	Progressive slab rates	20% with indexation / 10% without indexation
Firms including LLPs (resident and non-resident), AOP, BOI, etc	30%	20% with indexation / 10% without indexation
Resident Companies	30%	20% with indexation / 10% without indexation
Local authority	30%	20% with indexation / 10% without indexation
Co-operative Society	Progressive slab rates	20% with indexation / 10% without indexation
Overseas financial organisations under section 115AB, 115AC	40% (corporate) 30% (non-corporate)	10%
FIIs U/S 115AD	30%	10%
Other Foreign Companies	40%	20% with indexation / 10% without indexation

Tax Rates FY 2010-11 (UNION BUDGET, 2010)

A. Tax Slabs for Individuals, HUF, AOPs/BOIs and Others: 

(1) Income Tax Slabs/Rates for Male Individuals, HUFs, AOPs/BOI, AJPs and others:

Upto Rs 1,60,000	Nil
1,60,001 to 5,00,000	10%  of the amount by which the total income exceeds Rs. 1,60,000
5,00,001 to 8,00,000	Rs. 34,000 + 20% of the amount by which the total income exceeds Rs. 5,00,000
Above 8,00,000	Rs. 94,000 + 30 per cent of the amount by Rs. 8,00,000

(2) Income Tax Slabs/Rates for Resident Women:

Upto Rs 1,90,000	Nil
1,90,001 to 5,00,000	10%  of the amount by which the total income exceeds Rs. 1,90,000
5,00,001 to 8,00,000	Rs. 31,000 + 20% of the amount by which the total income exceeds Rs. 5,00,000
Above 8,00,000	Rs. 91,000 + 30 per cent of the amount by Rs. 8,00,000

 

(3) Income Tax Slabs/Rates for Resident Senior Citizens (65 years of age and above):

Upto Rs 2,40,000	Nil
2,40,001 to 5,00,000	10%  of the amount by which the total income exceeds Rs. 2,40,000
5,00,001 to 8,00,000	Rs. 26,000 + 20% of the amount by which the total income exceeds Rs. 5,00,000
Above 8,00,000	Rs. 86,000 + 30 per cent of the amount by Rs. 8,00,000

 

B. Tax Slabs for Co-Operative Societies:

Upto Rs 10,000	10% of the total income
10,001 to 20,000	Rs. 1,000 + 20%t of the amount by which the total income exceeds Rs. 10,000
Above 20,000	Rs. 3,000 + 30% of the amount by which the total income exceeds Rs. 20,000.

C. Tax Rates for Other Categories are:

(1) Firms: 30%

(2) Local Authorities: 30%

(3) In case of companies -

 - Domestic Companies: 30% of the Total Income.

 - Foreign Companies  :  In the case of a company other than a domestic company—

     (i)  on so much of the total income as consists of,—

(a)  royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961 but before the 1st day of April, 1976; or

(b)  fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964 but before the 1st day of April, 1976,

      and where such agreement has, in either case, been approved by the Central Government - 50%

     (ii) on the balance, if any, of the total income - 40%

D. Tax rates for Non-Residents:

Nature of Income	Rate (Excluding SC, E.CESS, SHEC)
Dividend (Other than on which DTT has been paid)	20%
Interest received on loans given in foreign currency to Indian concern or Government of India	20%
Income received in respect of units purchased in foreign currency of specified Mutual Funds / UTI	20%
Royalty or fees for technical services	For Agreements entered into after 31 May, 1997 but before 1 June 2005: 20% and After 1 June 2005: 10%
Interest on FCCB, FCEB / Dividend on GDRs (Other than on which DTT has been paid)	10%
The royalty/fees for technical services paid for Permanent Establishment (PE) in India	40%
Sportsmen or sports association	10%

Education Cess: ( Applicable on all assessee )

(1) Education Cess @2% on Income Tax

(2) SHEC  @1% on Income Tax

Surcharge:

(1) Surcharge will not to be applicable to individuals, HUF, AOP, BOI and Artificial Juridical persons (AJP).

(2) Surcharge in the case of a domestic company with income above Rs. 1,00,00,000 is 7.5%

(3) Surcharge on non domestic companies having income exceeding Rs. 1,00,00,000 shall be @ 2.5%