AGRICULTURAL INCOME Section 2 ( 1 )
Agricultural Income Means :
( a ) any rent or revenue derived from land which is situated in India and is used for agricultural purposes .
( b ) Any income derived from such land by : ( i ) agriculture , or ( ii ) the performance by a cultivator or receiver of rent - in - kind of any profess ordinarily employed to render the produce fit for the market , 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 only the aforesaid process has been performed ;
( 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 receiver of rent-in-kind of any land , provided that :
( i ) the building is on or in the immediate vicinity of the land and is a building which the cultivator of the receiver of rent or rent-in-kind requires as a dwelling - house , or as a store - house , or other out building in connection with the land , 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 and where the land is not so assessed to land revenue or subject to a local rate , it is not situated in urban area .
Thus the three most important conditions which must be fulfilled before a particular income may be treated as agricultural income are :
1 ) Land must be situated in India : The agricultural land must be situated in India . If the land is not situated in India and any income . is derived from such land by agriculture , the income is not an agricultural income for tax purpose .
2 ) Income must be derived from land : The land must be the immediate and effective source of income and not the secondary source . If the land is secondary source of income , such income is not agricultural income .
3 ) Land must be used for agricultural purpose : The term agricultural purpose has not been defined in the act and as such we fall back upon the general sense in which it is used in common language . It means cultivation of a field , which implies expenditure of human skill and labour ( with or without machines ) upon land , or in other words , tilling of the land , watering it , sowing of the seeds , planting and similar operations on the land , these are the basic operations and would require the expenditure of human skill and labour upon the land itself .
Agricultural Income Includes
1 ) Rent of Land . When one person ( landlord or tenant ) grants to another a right to use his land for agricultural purposes ; the former receives from the latter rent ( in cash or part of produce ) in consideration of such , user ; such rent is included in agricultural . income . Similarly , salami or premium received regularly for transfer of agricultural land is agricultural income .
2 ) Income derived from cultivation of such land . When a land is cultivated ( i.e. tilling of the land , sowing of seeds , watering and other agricultural operations are performed ) , any income derived from the produce of such land is called revenue . Where a part of the produce is appropriated by the cultivator for his needs , the difference between the cost and selling price ( on the basis of average market rate for the year ) would be the income from agriculture .
3 ) Income from making the produce fit to be taken to market . Where the crop as harvested does not find a market , some operation ( manual or machine ) may be performed by the cultivator or receiver of rent - in - kind to make it marketable commodity . enhances the value of the produce . Such enhanced income is also Such operation agricultural income .
4 ) Income from sale of produce . When the cultivator or receiver of rent - in - kind sells the produce either after performing such activity , as discussed under ( 3 ) above or without doing any such activity , the income is agricultural income even if he keeps a shop for the sale of such produce .
5 ) Income from agricultural buildings . If certain conditions are satisfied , he income from building is treated as agricultural income .
Non - Agricultural Incomes
The following although relate to land yet as they are not derived form . land used for agricultural purposes are not agricultural incomes :
1 ) Income from Market .
2 ) Income from stone quarries
3 ) Income from mining royalties
4 ) Income from land used for storing agricultural produce
5 ) Income from supply of water for irrigation purpose
6 ) Income from self - grown grass , trees or bamboos ;
7 ) Income from fishers ;
8 ) Income from the sale of earth for brick - making
9 )Remuneration received as manager of an agricultural farm .
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