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;]