Questions and Answers
What is the amount of agricultural income exempt for Ms. Sowmya?
Which of the following is considered agricultural income?
What is the tax liability of Miss Nisha for Assessment Year 2024-25 under the default tax regime?
In what distance range from the local limits of a municipality is agricultural income derived from a farm building not assessed to land revenue considered agricultural income?
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Which of the following statements about taxability of agricultural income under the Income-tax Act, 1961 is/are true?
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Where are the rates of income-tax mentioned?
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What shall be the tax liability of Mr. Nekinsaan under optional tax regime for A.Y. 2024-25?
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Study Notes
Basic Concepts of Agricultural Income and Taxation
- Agricultural income can be generated from farm buildings let out for storage or residential purposes, subject to certain exemptions.
- Ms. Sowmya's agricultural income includes earnings from multiple farm buildings:
- ₹3 lakh from food grain storage
- ₹10 lakh from dairy storage
- ₹15 lakh from residential letting
- Total agricultural income exemptions depend on the specific classifications under tax laws.
Types of Agricultural Income
- Income from various agricultural activities includes:
- Breeding of livestock
- Fisheries
- Income from saplings or seedlings grown in a nursery
- Income derived from juice centers is not classified as agricultural income.
Tax Calculation for Non-Residents
- Miss Nisha's income for AY 2024-25:
- Long-term capital gains on equity shares: ₹1,80,000 (with Securities Transaction Tax paid)
- Other income: ₹2,75,000
- Default tax regime liability can result in tax amounts as low as nil or specific amounts calculated based on total income.
Proximity Regulations for Agricultural Land
- Agricultural income from buildings near agricultural land is exempt, if located within specified distances from municipal limits; distances vary with population as follows:
- 3 kms from a municipality with a population of 80,000
- 1.5 kms from a municipality with a population of 12,000
- 2 kms from a municipality with a population of 11 lakh
- 8 kms from a municipality with a population of 10.5 lakh
Taxability Statements under Income-tax Act, 1961
- Key points about agricultural income taxability:
- Income from saplings/seedlings in nurseries is tax-exempt under section 10(1).
- 60% dividend from tea company shares is also agricultural income exempt under section 10(1).
- Agricultural income should be considered in total income for tax computation based on threshold values.
- Specific conditions apply based on age (e.g., over 50 years) and income exceeding threshold amounts.
Income Tax Rates
- Income tax rates are detailed in the Annual Finance Act's First Schedule and the Income-tax Act of 1961.
Income Reporting Example
- Mr. Nekinsaan (aged 43) reports:
- Capital Gains under section 112A: ₹120 lakhs
- Capital Gains under section 111A: ₹110 lakhs
- Other Income: ₹520 lakhs
- Under the optional tax regime for AY 2024-25, his tax liability is calculated based on total income.
Compliance Issues
- Mr. Raman (aged 64) faces scrutiny due to a lack of explanation for ₹7 lakhs in unrecorded investments, impacting his tax liabilities.
These topics highlight crucial aspects of agricultural income, taxation principles, and specific case scenarios that are essential for understanding taxation in India.
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