Benefits available to Farmers

S. No

Section/Rule

Particulars

Benefits

1.

Section 10(1)

Exemption to Agriculture Income

Agricultural income is exempt from tax in the hands of an assessee.

2.

-

Partial integration of agricultural income

Under Section 10(1), agricultural income is exempt from tax. However, if a specified assessee has:
(a) non-agricultural income exceeds the basic exemption limit, and
(b) agricultural income exceeds Rs. 5,000,
then both incomes are considered for rate calculation under the partial integration scheme.
• Method of Partial Integration

The manner of tax calculation in the case of the partial integration regime is as follows:

Step 1: Calculate net agricultural income.

Step 2: Calculate tax on the aggregate of the non-agricultural total income and net agricultural income, as if such income were the total income.

Step 3: Calculate tax on the aggregate of net agricultural income and the maximum exemption limit as if such income were the total income.

Step 4: The amount of tax calculated in Step 2 shall be reduced by the amount of tax calculated in Step 3.

Step 5: The result of Step 4 shall be reduced by rebate under Section 87A, if applicable. The resultant figure shall be increased by surcharge and health & education cess.

Step 6: The amount arrived in Step 5 is the final tax liability payable by the assessee.

3.

Section 33AB

Tea, Coffee or Rubber Development Account

A farmer engaged in the business of growing and manufacturing tea, coffee, or rubber in India is eligible for a deduction under Section 33AB, subject to certain conditions. Lower of the following is allowed as deduction:

• 40% of the profits of such business (before deduction under this section); or

• The amount actually deposited in the specified account.

4.

Rule 7A, Rule 7B and Rule 8

Partly Agricultural and Partly Business Income

For a business’s involving both agricultural and non-agricultural activities, income is split on a presumptive basis:

5.

Section 2(14)

Agricultural land is not a capital asset

An agricultural land situated beyond the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is not treated as capital asset if it does not fall within following distances (to be measured aerially):

a) Up to 2 kms from local limits of the municipality or cantonment board, if population of such municipality or cantonment board exceeds 10,000 but does not exceed 1,00,000;

b) Up to 6 kms from local limits of the municipality or cantonment board, if population of such municipality or cantonment board exceeds 1,00,000 but does not exceed 10,00,000;

c) (c) Up to 8 kms from local limits of the municipality or cantonment board, if population of such municipality or cantonment board exceeds 10,00,000

6.

-

No capital gain on transfer of rural agriculture land

If a farmer sells rural agricultural land, the gain arising from such transfer is not chargeable to tax under the head "Capital Gains."

7.

Section 10(37)

Capital gains on compulsory acquisition of urban agricultural land

If any capital gain arises from the transfer of urban agriculture land, it shall be exempt from tax if the following conditions are satisfied:

(a) Such land is owned by an Individual or HUF;

(b) Such HUF or the individual (or any of his parent) has used the land for agricultural purposes for 2 years prior to the date of transfer;

(c) The land is transferred by way of compulsory acquisition under any law, or the consideration for its transfer should be determined or approved by the Central Government or the RBI; and

(d) Income has arisen from such compensation or consideration (including enhanced compensation), and it should be received on or after 01-04-2004.

8.

Section 54B

Capital gain exemption

Section 54B provides an exemption to individuals and HUFs in respect of capital gain arising from the transfer of agricultural land. The exemption is allowed if the amount of capital gain is further invested in the purchase of new agricultural land. (subject to certain condition.)