ITR filing for Farmers - A Complete guide
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In this comprehensive guide, we’ll walk you through the process of ITR filing for farmers, tax slabs, Douments required, agriculture income taxation, etc in simple language.
Types of income for farmers
1. Agricultural Income: Agricultural income forms the backbone of earnings for most farmers. It includes revenue generated from a range of farming activities, including:
Crop Cultivation: This encompasses income derived from cultivating crops such as grains, vegetables, fruits, and cash crops like cotton or sugarcane. It covers all stages of crop production, from planting to harvesting.
Agricultural income is typically exempt from income tax under Section 10(1) of the Income Tax Act, 1961.
2. Non-Agricultural Income: In addition to income derived directly from farming activities, farmers may also earn non-agricultural income from various other sources, including:
Animal Husbandry: Income from rearing and breeding livestock, poultry, and other animals falls under this category. It includes revenue from selling livestock, eggs, milk, wool, or other animal products.
Dairy Farming: Farmers who engage in dairy farming earn income from milk production and sale, as well as from products derived from milk such as butter, cheese, and yogurt.
Rent from Agricultural Land: If farmers lease out their agricultural land to others for farming or non-farming purposes, the rental income generated falls under non-agricultural income. This can be a significant source of additional revenue for farmers.
Interest on Investments: Farmers may earn interest income from investments made in fixed deposits, savings accounts, or other financial instruments. This income is taxable under the head “Income from Other Sources” and must be included in the total income for tax calculation purposes.
Income from Other Businesses: Some farmers may engage in non-farming businesses alongside their agricultural activities. This could include businesses such as retail, hospitality, transportation, or any other entrepreneurial ventures.
Non-agricultural income is subject to income tax as per the prevailing tax rates and is not eligible for the agricultural income tax exemption.
Understanding the distinction between agricultural and non-agricultural income is crucial for farmers when filing their Income Tax Returns (ITRs). Proper categorization of income ensures compliance with income tax act and helps optimize tax planning strategies.
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
Agriculture income is exempt as discussed above. The Income Tax Act indirectly taxes agricultural income by partially integrating it with non-agricultural income, aiming to tax the latter at higher rates. This method applies to individuals, HUFs, AOPs, BOIs, and artificial juridical persons when two conditions are met: net agricultural income exceeds Rs. 5,000 annually, and non-agricultural income surpasses the basic exemption limit. For individuals below 60 years, this limit is Rs. 2.5 lakh; for those aged 60-80, it’s Rs. 3 lakh, and for those above 80, it’s Rs. 5 lakh. This method doesn’t apply to companies, firms/LLP, co-operative societies, and local authorities.
Which ITR form is applicable for farmers?
Agricultural income is reported under the “Agriculture Income” column in the Income Tax Return (ITR) forms. Specifically, in ITR 1, which is also known as the Sahaj form, there is a dedicated section for declaring agricultural income. However, there’s a condition associated with using ITR 1: it’s applicable only when the agricultural income does not exceed Rs. 5,000.
If the agricultural income surpasses the Rs. 5,000 limit, then ITR 2 form needs to be filed instead. ITR 2 is a broader form that allows for the declaration of various types of income, including agricultural income exceeding Rs. 5,000.Â
Due date of ITR filing for Farmers
The due date of ITR filing for farmers is 31st July. The last date to file revised ITR if correction is required due to mistake made is 31st December. Also the last date to file belated ITR is 31st December.
Documents required for ITR filing for farmers
- Agriculture Sale and expense billsÂ
Bank Statements: Collect your bank statements showing agriculture income.
Investment Proofs: If you’ve made any investments eligible for tax deductions under Section 80C, such as PPF, ELSS, or life insurance premiums, keep the proofs handy.
Other Income Proofs: Gather documents supporting any other sources of income like rental income, capital gains, etc.
- 26AS and Annual Information statement (AIS): 26AS will reflect any TDS transaction. AIS will show income from other sources too like saving interest, FD interest, purchase and sell of shares or mutual funds, etc
How to file ITR of Farmers?
Step 1: Gather Necessary Documents as mentioned above
Step 2: Choose the Right ITR Form
As a farmer, you’ll likely file ITR using Form ITR-1 or Form ITR-2, depending on your income sources.
Step 3: Fill in the Details
Ensure you input accurate information regarding your income, deductions, and tax payments. Double-check to avoid any errors that might lead to complications later on.
Step 4: Claim Deductions
You’re entitled to various deductions under Section 80C (like investments in PPF, LIC, etc.), Section 80D (health insurance premiums), and Section 80G (donations). Claim these deductions wisely to minimize your tax liability.
Step 5: Submit and Verify
Once you’ve filled in all the required details and submitted the ITR, it’s time to verify your return. You can do this electronically using Aadhaar OTP, Net Banking, or by sending a signed physical copy.Â
Step 6: Keep Records
After filing your ITR, maintain copies of the filed return, acknowledgment receipt, and supporting documents for future reference. These records are essential for income tax notice.
Income tax slab for farmers 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% |
Income tax slab for farmers below 60 years (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% |
Income tax slab for farmers between 60 & 80 years
| 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 farmers above 80 years
| 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% |
Conclusion
 By following the simple steps outlined in this guide and staying informed about income tax act, you can breeze through tax season like a pro. Remember, timely and accurate ITR filing not only keeps you compliant with the law but also helps you optimize your tax liabilities.
FAQ (Frequently asked Questions)
1. Do farmers need to file Income Tax Returns ?
If the farmer only has agriculture income then ITR filing is not required. But if there is other income alongwith agriculture income and this total income exceeds the exemption limit set by the Income Tax Act then ITR filing is mandatory.
2. What types of income do farmers need to declare in their ITRs?
Farmers need to declare all sources of income, including agricultural income, non-agricultural income such as rent from agricultural land, interest on investments, and income from other businesses.
3. Which ITR form should farmers use for filing their returns?
 If the agricultural income exceeds Rs. 5,000, they must file ITR-2.
4. Is agricultural income taxable?
Agricultural income is generally exempt from tax. However, certain types of agricultural income, such as income from processing agricultural produce or renting out agricultural land for non-agricultural purposes, is taxable.
5. What documents are required for ITR filing for farmers?
Farmers should gather documents such as Aadhar Card, PAN Card, bank statements, details of agricultural income, receipts of agricultural expenses, and records of non-agricultural income.
6. Are there any deductions available for farmers?
Yes, farmers can claim deductions under Section 80C for investments like PPF, LIC premiums, and deductions for expenses related to agricultural activities, such as agricultural loans, irrigation expenses, and agricultural equipment.
7. What should farmers do if they face difficulties in filing their ITRs?
If farmers encounter challenges while filing their ITRs, they can seek assistance from tax consultants, chartered accountants, or utilize online resources provided by the Income Tax Department.
8. When is the deadline for filing ITRs for farmers?
The deadline for filing ITRs for individuals, including farmers, is usually July 31st of the assessment year. However, it’s essential to check for any updates or extensions provided by the Income Tax Department.
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