INCOMES NOT INCLUDED IN TOTAL INCOME
[SECTION 10]
Let us now have a look at the various incomes which are exempt from tax and the conditions to be
satisfied in order avail such exemption.
(1) Agricultural income [Section 10(1)]
Section 10(1) provides that agricultural income is not to be included in the total income of the
assessee. The reason for totally exempting agricultural income from the scope of central income-
tax is that under the Constitution, the Central Government has no power to levy a tax on
agricultural income.
Definition of agricultural income [Section 2(1A)]
This definition is very wide and covers the income of not only the cultivators but also the land
holders who might have rented out the lands. Agricultural income may be received in cash or in
kind.
Agricultural income may arise in any one of the following three ways:-
(i) It may be rent or revenue derived from land situated in India and used for agricultural
purposes.
(ii) It may be income derived from such land
(a) through agriculture or
(b) the performance of a process ordinarily employed by a cultivator or receiver of rent in
kind to render the produce fit to be taken to the market or
(c) through the sale of such agricultural produce in the market.
(iii) Lastly, agricultural income may be derived from any farm building required for agricultural
operations.
Now let us take a critical look at the following aspects:
(i) Rent or revenue derived from land situated in India and used for agricultural purposes:
The following three conditions have to be satisfied for income to be treated as agricultural income:
(a) Rent or revenue should be derived from land;
(b) Land has to be situated in India (If agricultural land is situated in a foreign country, the entire income would be taxable); and
(c) land should be used for agricultural purposes.
The amount received in money or in kind, by one person from another for right to use land is
termed as Rent. The rent can either be received by the owner of the land or by the originaltenant from the sub-tenant. It implies that ownership of land is not necessary. Thus, the rent received by the original tenant from sub-tenant would also be agricultural income subject the other conditions mentioned above.
The scope of the term “Revenue” is much broader than rent. It includes income other than
rent. For example, fees received for renewal for grant of land on lease would be revenue
derived from land.
(ii) Income derived from such land
(a) through Agriculture: The term “Agriculture” has not been defined in the Act. However,
cultivation of a field involving human skill and labour on the land can be broadly termed as
agriculture.
“Agriculture” means tilling of the land, sowing of the seeds and similar operations. It involves basic operations and subsequent operations.
“Agriculture” comprises within its scope the basic as well as the subsidiary operations
regardless of the nature of the produce raised on the land. These produce may be grain,
fruits or vegetables necessary for sustenance of human beings including plantation and groves or grass or pasture for consumption of beasts or articles of luxury such as betel, coffee, tea, spices, tobacco or commercial crops like cotton flax, jute hemp and indigo. The term comprises of products of land having some utility either for consumption or for trade and commerce and would include forest products such as sal, tendu leaves etc.
Definition of agricultural income [Section 2(1A)]
This definition is very wide and covers the income of not only the cultivators but also the land
holders who might have rented out the lands. Agricultural income may be received in cash or in
kind.
Agricultural income may arise in any one of the following three ways:-
(i) It may be rent or revenue derived from land situated in India and used for agricultural
purposes.
(ii) It may be income derived from such land
(a) through agriculture or
(b) the performance of a process ordinarily employed by a cultivator or receiver of rent in
kind to render the produce fit to be taken to the market or
(c) through the sale of such agricultural produce in the market.
(iii) Lastly, agricultural income may be derived from any farm building required for agricultural
operations.
Now let us take a critical look at the following aspects:
(i) Rent or revenue derived from land situated in India and used for agricultural purposes:
The following three conditions have to be satisfied for income to be treated as agricultural income:
(a) Rent or revenue should be derived from land;
(b) Land has to be situated in India (If agricultural land is situated in a foreign country, the entire income would be taxable); and
(c) land should be used for agricultural purposes.
The amount received in money or in kind, by one person from another for right to use land is
termed as Rent. The rent can either be received by the owner of the land or by the originaltenant from the sub-tenant. It implies that ownership of land is not necessary. Thus, the rent received by the original tenant from sub-tenant would also be agricultural income subject the other conditions mentioned above.
The scope of the term “Revenue” is much broader than rent. It includes income other than
rent. For example, fees received for renewal for grant of land on lease would be revenue
derived from land.
(ii) Income derived from such land
(a) through Agriculture: The term “Agriculture” has not been defined in the Act. However,
cultivation of a field involving human skill and labour on the land can be broadly termed as
agriculture.
“Agriculture” means tilling of the land, sowing of the seeds and similar operations. It involves basic operations and subsequent operations.
“Agriculture” comprises within its scope the basic as well as the subsidiary operations
regardless of the nature of the produce raised on the land. These produce may be grain,
fruits or vegetables necessary for sustenance of human beings including plantation and groves or grass or pasture for consumption of beasts or articles of luxury such as betel, coffee, tea, spices, tobacco or commercial crops like cotton flax, jute hemp and indigo. The term comprises of products of land having some utility either for consumption or for trade and commerce and would include forest products such as sal, tendu leaves etc.
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