Define Agricultural Income and with examples.

Agricultural income is defined as that income which is in the form of rent or any other form which is earned from a land situated in India and which is being used for agricultural purposes. Agricultural purpose is satisfied when persons are using their skills and labor while working on the land. Produce of land which is natural and for which no human effort has been put in is not to be considered a part of agricultural income.

For example, revenue derived from forests is not agricultural income. Whatever human effort is being put in right from tilling the land to harvesting and marketing the produce, its purpose is termed as agricultural. It is to be noted that if there is a higher value addition before marketing, for example fruits being converted to canned juice, its sale will not generate agricultural income.

The reason why identification of agricultural incomes is important is its tax free nature. People find ways to term their incomes as agricultural so that they can escape payment of tax.

Therefore five kinds of income have been identified:

  • Any rent or revenue derived from land which may be in cash or in kind.
  • Any income from marketing of produce which does not require higher value addition, for example, rice separated from husk.
  • Income from agriculture.
  • Income from sale of produce, and
  • Income from farm building. This building must be in a classified rural areal not in an urban vicinity.

There are many incomes which seem agricultural in nature but are included in non-agricultural incomes, for example, commission for selling agricultural produce, fisheries, etc .

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