ITR filing for Agriculture income
Learn everything about ITR filing for Agriculture income earned by farmers such as taxability, tax rate, choosing ITR form, tax rates, due date, penalty, how to file ITR. Contact us for filing!
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Filing an Income Tax Return (ITR) is a critical responsibility for farmers earning agriculture income. This annual process involves declaring income earned during the financial year and paying the applicable taxes to the government. In this guide you will learn about taxability, tax rates, how to choose ITR form, how to file ITR, Due date and penalties for not filing ITR for farmers.
What is an ITR?
What is Agriculture income?
The Income Tax Act defines agricultural income through three main activities:
1. Rent or revenue from agricultural land in India: This includes income received for granting the right to use land. However, proceeds from land sales are not considered agricultural income.
2. Income from agricultural land, involving:
- Basic operations like cultivation, tilling, sowing, and planting directly on the land.
- Subsequent operations like weeding, pruning, harvesting, etc., and processes making produce market-ready.
- Sale of agricultural produce, with income partly exempt and partly taxable based on whether the produce undergoes processes to become marketable.
Rules are prescribed for bifurcating income into agricultural and non-agricultural for products like tea, coffee, and rubber.
| Operation | Agricultural Income | Non-Agricultural Income |
| Growing and Manufacturing Tea | 60% | 40% |
| Manufacturing Rubber | 65% | 35% |
| Growing and curing Coffee | 75% | 25% |
| Coffee grown, cured, roasted, and grounded with or without mixing chicory or other flavouring ingredients | 60% | 40% |
3. Income derived from farm buildings for agricultural operations is classified as agricultural income under certain conditions:
The building should be situated on or in the vicinity of agricultural land and used by the landowner or cultivator for residential or storage purposes related to agricultural activities.
One of the following conditions must be met:
- The land is assessed by land revenue or a local rate collected by government officers.
- If the above condition isn’t met, the land should not be located within specific regions as follows:
| Aerial distance from municipality* | Population as per last preceding census. |
| Within 2 kms | 10,000 to 1,00,000 |
| Within 6 kms | 1,00,000 to 10,00,000 |
| Within 8 kms | > Rs. 10,00,000 |
Taxation of Agriculture income
Agricultural income, as outlined above, is generally exempt from taxation under the Income Tax Act. However, the Act employs an indirect method to tax agricultural income by partially integrating it with non-agricultural income. This approach aims to tax non-agricultural income at higher rates, thereby indirectly affecting the taxation of agricultural income.
This method of partial integration applies to individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and artificial juridical persons, under the following conditions:
- Net agricultural income exceeds Rs. 5,000 annually.
- Non-agricultural income exceeds the basic exemption limit, which varies based on age:
- For individuals below 60 years of age, the limit is Rs. 2.5 lakh.
- For individuals aged between 60 and 80 years, the limit is Rs. 3 lakh.
- For individuals above 80 years of age, the limit is Rs. 5 lakh.
This integration method is designed to ensure that higher-income earners pay tax on their non-agricultural income at higher rates, even if a portion of their overall income comes from agriculture.
It’s important to note that this method does not apply to companies, firms, Limited Liability Partnerships (LLPs), cooperative societies, and local authorities. These entities are subject to different tax regulations and are not impacted by the partial integration of agricultural and non-agricultural income.
What happens if Cash is deposited in bank?
Normally there are cases when a farmer deposits agriculture income recieved in cash earned during the year or over a number of years of more than Rs. 10 lakhs in their saving account.Â
Due to this many farmers recieve income tax notice to explain the nature of cash deposits with proof. Normally income tax notice is recieved if ITR is not filed which helps in declaring the agriculture income. Replying to income tax notice is costly than filing ITR every year.
Hence filing ITR is highly recommended for all farmers eventhough agriculture income is fully tax free. This will help farmers to avoid income tax notice in the future.
Income tax slab for Farmer below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
In Old tax regime, a maximum tax rebate of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs.Â
Income tax slab for Farmer of all age groups (New Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
You cannot claim any deduction under Section 80C, 80D, 80G, etc
In New tax regime, a maximum tax rebate of Rs. 25,000 is available for income upto Rs. 7 lakhs meaning your income is totally tax free till Rs. 7 lakhs.
Income tax slab for Farmer between 60 & 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for Farmer above 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax deduction under Old regime for Farmers
Income tax deductions are crucial for farmers to reduce their taxable income if they income from sources other than farming, thereby lowering their overall tax liability. These deductions can apply to various expenses and investments of personal nature.Here’s a comprehensive guide to the key income tax deductions available to them:
1. Section 80C Deductions
- Maximum Limit: ₹1,50,000 per financial year.
- Eligible Investments and Expenses:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- National Savings Certificates (NSC)
- Life Insurance Premiums
- Tuition Fees for Children
- Principal Repayment on Home Loan
- Equity-Linked Savings Scheme (ELSS), etc
2. Section 80D Deductions
- Health Insurance Premiums:
- Self, Spouse, and Children: Up to ₹25,000.
- Parents: Additional ₹25,000 (₹50,000 if parents are senior citizens).
- Preventive Health Check-up: Up to ₹5,000 within the overall limit.
3. Section 80E Deductions
- Education Loan Interest: Deduction for interest paid on education loans for higher education, with no maximum limit. Applicable for loans taken for self, spouse, or children.
4. Section 80G Deductions
- Donations to Charitable Institutions: Deduction for donations to specified funds and charitable institutions. The percentage of deduction (50% or 100%) depends on the organization.
5. Section 80TTA and 80TTB Deductions
- 80TTA: Deduction on interest income from savings accounts up to ₹10,000.
- 80TTB: For senior citizens, a deduction up to ₹50,000 on interest from savings accounts, fixed deposits, etc.
6. Section 80GG Deductions
- Rent Paid: Deduction for individuals who do not receive HRA (House Rent Allowance). The deduction is the least of:
- ₹5,000 per month.
- 25% of total income.
- Rent paid minus 10% of total income.
7. Section 80GGB and 80GGC Deductions
- Political Contributions: Deduction for contributions to political parties or electoral trusts. (80GGB for companies and 80GGC for individuals).
Which ITR form is applicable in case of Agriculture income?
The appropriate Income Tax Return (ITR) form to use in case of agricultural income depends on the nature and total income of the taxpayer. Here are the relevant ITR forms:
ITR-1 : This form is applicable for individuals who have:
- Total income up to Rs. 50 lakh.
- Agricultural income up to Rs. 5,000.
- Income from salary or pension, one house property, and other sources (like interest).
ITR-2: This form is applicable for individuals and Hindu Undivided Families (HUFs) who have:
- Total income exceeding Rs. 50 lakh.
- Agricultural income exceeding Rs. 5,000.
- Income from salary or pension, more than one house property, capital gains, and other sources.
- No income from business or profession.
ITR-3: This form is applicable for individuals and HUFs who have:
- Income from business or profession.
- Agricultural income along with other sources of income.
ITR-4 (Sugam): This form is applicable for individuals, HUFs, and firms (other than LLPs) who are:
- Residents with total income up to Rs. 50 lakh.
- Having income from business and profession which is computed under sections 44AD, 44ADA, or 44AE.
- Agricultural income up to Rs. 5,000.
In summary, if you have agricultural income along with other incomes, the applicable ITR form will depend on the total income, the type of income, and the taxpayer’s status (individual, HUF, etc.).Â
Documents Required for ITR filing for Agriculture income
- PAN card
- Aadhaar card
- Records of agricultural income (Invoices from the sale of agricultural produce)
- Land ownership documents (title deeds, lease agreements)
- Details of rent or revenue received from agricultural land
- Expense invoice related to agricultural operations (seed purchase, fertilizers, pesticides, etc.)
- Bank statements reflecting transactions related to agricultural income and expenses
- Copy of the previous year’s income tax return for reference
- Detailed records of basic operations like cultivation, tilling, sowing, and planting
- Records of subsequent operations such as weeding, pruning, and harvesting
- Documents related to processes that make agricultural produce market-ready, if applicable
- Documents proving the use of farm buildings for agricultural operations (e.g., storage of produce, residential use by the landowner or cultivator)
- Form 26AS and AIS for verification TDS and income from various sourcesÂ
- Any other documents that might be relevant for claiming deductions or exemptions
Difference between Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) are essential documents for taxpayers in India, each serving distinct purposes:
Form 26AS: This document acts as a tax passbook, summarizing the taxes deducted, collected, and paid by the taxpayer during a financial year. It includes details on:
- Tax Deducted at Source (TDS)
- Tax Collected at Source (TCS)
- Advance tax payments
- Self-assessment tax payments
- Tax refunds received
The data in Form 26AS is sourced from employers, banks, and other entities that deduct or collect tax, as well as from the taxpayer’s own payments.
Annual Information Statement (AIS): The AIS provides a comprehensive view of a taxpayer’s financial transactions, encompassing a broader range of information. It includes detailed records of:
- Interest and dividend income
- Shares and mutual funds transactions
- Property transactions
- Significant gifts
- Cash deposits and withdrawals exceeding Rs. 10 lakhs which is mostly the case for farmers
- Other financial activities
This information is sourced from banks, financial institutions, and other entities that report transactions to the Income Tax Department.
Both Form 26AS and the AIS are accessible on the Income Tax Department’s e-filing portal, offering taxpayers a complete and detailed overview of their tax and financial information for accurate ITR filing.
Step-by-Step Guide for ITR filing for Agriculture income
Registering on the Income Tax E-Filing Portal
- Visit the Portal: Go to the official Income Tax Department e-filing website: www.incometaxindiaefiling.gov.in.
- New User Registration: If you are a first-time user, click on ‘Register Yourself’. Select the ‘Individual’ category and enter your PAN, which will serve as your User ID.
- Fill in Details: Provide your basic details, contact information, and create a password.
Choosing the Correct ITR Form
- Determine whether to use ITR-1, ITR-2, ITR-3, or ITR-4 based on your income sources and eligibility.
Filling Out Personal Details and Income Information
- Select the Assessment Year: Choose the appropriate assessment year for which you are filing the return.
- Income Details: Enter your income details under the appropriate heads:
- Salary Income
- Income from Other Sources
- Business Income
- House Property Income
- Capital Gains
Claiming Deductions and Exemptions
- Deductions under Section 80C: Enter eligible deductions such as life insurance premiums, PPF, NSC, and tuition fees.
- Deductions under Section 80D: Include premiums paid for health insurance.
- Other Deductions: Claim deductions under other sections like 80E for education loan interest, 80G for donations, etc.
Verifying and Submitting the Return
- Calculate Tax: Click on ‘Compute Tax’ to see the tax liability or refund.
- Tax Payment: If there is any tax payable, pay it through the e-filing portal using net banking or other available options.
- Preview and Submit: Preview the completed ITR form, ensure all details are correct, and click ‘Submit’.
- Verification: After submission, verify your ITR within 30 days of filing. You can e-verify using methods such as Aadhaar OTP, net banking, or through a digital signature. Alternatively, you can send a physical signed copy of ITR-V to the Centralized Processing Center (CPC).
What is the Due date of ITR filing for Agriculture income?
For farmers, the due date to file Income Tax Returns is July 31st.
If you miss the due date, you can still file Belated ITR by December 31st, but you will need to pay late fees. Additionally, if you make any mistakes while filing your ITR before the due date, you can correct them by filing a revised ITR any number of times until December 31st.
What are the Consequences of non-payment of Tax and non-filing of ITR by farmers?
Failing to pay taxes and file your Income Tax Return (ITR) can lead to severe consequences. Here are the key penalties and charges you may face:
Unreported Income: Unreported income is considered illegal and can result in a penalty of 100% to 300% of the evaded tax under Section 271(C) for tax evasion.
Undisclosed Income: Depending on the circumstances, a penalty ranging from 10% to 90% of the undisclosed amount may be imposed under Section 271AAB.
Late Filing: If you miss the filing deadline, you will be charged a 1% interest per month or part thereof on the unpaid tax amount as per Section 234A.
Benefits of ITR filing for Agriculture income
For farmers, filing Income Tax Returns (ITR) is crucial for several reasons:
Compliance with the Law: Filing ITR ensures legal compliance, as it is a legal obligation for individuals with income above a certain threshold. Non-compliance can result in penalties and legal consequences.
Proof of Income: ITR serves as a documented proof of income, which is essential for various financial transactions and applications.
Loan Applications: Banks and financial institutions require ITRs as proof of income for home loan, business loan, personal loan, etc
Credit Card Applications: Credit card issuers assess financial stability and repayment capacity using ITR and determine the maximum credit limit. Higher the income, higher the credit limit.
Visa Applications: Many countries require Income tax returns for visa applications for travel or study to ensure financial support.
Claiming Tax Refunds: Filing ITR allows you to claim refunds if excess tax has been deducted or if advance tax paid exceeds the actual tax liability. Without filing returns, TDS refunds are not possible.
Carry Forward of Losses: Filing ITR enables you to carry forward losses to subsequent years, benefiting business owners and investors by offsetting future profits and reducing taxable income.
Avoiding Penalties: Filing ITR on time helps avoid penalties and interest for late filing or non-filing. The penalty for late filing can be substantial, and interest may accrue on unpaid taxes.
Avoiding Scrutiny: Filing ITR regularly and accurately helps avoid unwanted scrutiny by tax authorities, demonstrating responsibility and reducing the risk of detailed examinations.
Documentation for Insurance: Insurance companies require ITRs for high-value insurance policies to assess the applicant’s ability to pay premiums and maintain the policy.
Participating in Government Tenders: Business owners must submit ITRs for government tenders to demonstrate financial health and stability.
By filing ITR, farmers can ensure legal compliance, provide proof of income for financial transactions, claim tax refunds, carry forward losses, avoid penalties, prevent scrutiny, obtain insurance, and participate in government tenders.
Conclusion
Understanding the taxability for agriculture income involves understanding what is agriculture income, exemptions, applicable deductions and tax rates. By staying informed about these aspects, farmers can file their Income tax return correctly by choosing the right ITR form. Regularly updating knowledge about income tax and seeking professional advice when needed can further aid in effective tax planning.
In case you still have any query or want to file ITR with CA assisstance then you can contact us at +91 9769647582
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