Costing and Taxation · Ch 6 — Agricultural Income
Agricultural vs Non-Agricultural Income: Common Instances
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Agricultural vs Non-Agricultural Income: Common Instances
Not everything connected to land, farming, or rural activity qualifies as agricultural income under Section 2(1A). The table below sets out common instances on both sides of the line, each turning on whether the income genuinely traces back to a basic agricultural operation on land used for agriculture.
| Agricultural Income | NOT Agricultural Income |
|---|---|
| Rent received for land let out for growing crops | Income from dairy farming, poultry, or fishery (no cultivation of land is involved) |
| Income of a cultivator from the sale of standing crops or harvested produce (with no further processing beyond what a cultivator ordinarily does) | Income from spontaneous forest growth, where no human cultivation operation (tilling, sowing, etc.) was ever performed |
| Income from a process ordinarily employed by a cultivator to make produce marketable (e.g., drying, cleaning) | Interest on arrears of rent due from agricultural land (this is compensation for delay, not rent itself, and is taxed as Income from Other Sources) |
| Income from a farm house meeting the Section 2(1A)(c) conditions (on/near agricultural land, used as a dwelling/store connected with cultivation) | Dividend received by a shareholder from a company that itself carries on agriculture (the shareholder's income is dividend income from shares, not income from land) |
| Rent received from land used for agricultural purposes, even if the tenant grows the crop, not the landowner | Royalty received for allowing stone-quarrying or mining operations on agricultural land (extraction of a mineral resource is not "agriculture") |
The underlying test, stated once
Note
The single question to ask …