13 Apr

NOW A STRICT EXAMINATION OF AGRICULTURAL INCOME IN INCOME TAX

NOW A STRICT EXAMINATION OF AGRICULTURAL INCOME IN INCOME TAX

Taxpayers who show an agricultural income of more than Rs 10 lakh while filing their income tax will now have to be more careful. The Income Tax Department is now keeping a close eye on income earners who save tax by showing farm income.

So the information given below is useful for those who show an agricultural income in the income tax filing

What is the report on agricultural income recently submitted by the CAG (Comptroller and Auditor General of India)?

The CAG (Comptroller and Auditor General of India) has prepared a report on assessments relating to agricultural income which was presented in the 49th report of the Public Accounts Committee which clearly stated that for rich farmers whose agricultural income exceeds Rs.10 lacs the investigation will have to be dealt with.

What is agricultural income?

The general meaning of agricultural income is:

(a) Any rent or revenue derived from land situated in India and used for agricultural purposes.

(b) From such land any product suitable for market or sale of such products is obtained by processing agricultural products.

(c) Any income of a farm house subject to the satisfaction of certain conditions specified in this regard in section 2 (1A).

(d) Seedlings grown in the nursery or any income from seedlings shall be considered agricultural income.

Also, Section 10 (1) of the Income-tax Act exempts agricultural income from tax.

If he/she is earning income from agriculture then what should be taken care of?

The income earned by the taxpayer is deductible, hence the documents supporting the taxpayer's expenses incurred for obtaining farm income, receipts for the sale of sold crop, documents relating to ownership/rights on farmland, cash book and/or bank statement of the taxpayer should be properly maintained. Receipts on account of sale of agricultural products, showing account bills and receipts.

What special points have the Public Accounts Committee underlined in its report?

The department has developed computer-aided scrutiny selection (CASS) software to select scrutiny cases. CASS is a centralized system for the selection of scrutiny cases and includes special conditions for the selection of cases with more than one threshold (i.e. Rs. 10 lakhs) of agricultural income.

According to the parliamentary committee, the finance ministry should develop its own mechanism for direct scrutiny of tax-free claims when agricultural revenue exceeds Rs 10 lakh.

What can a taxpayer learn from this?

The government wants to state that if the taxpayer's agricultural income is more than Rs 10 lakh, he/she should take special care to keep the books of account and ensure that the income disclosed in the income tax return is accurate and avoid the problems during scrutiny.

 

Regards

Santosh Patil

ICA & MBA

9769201316

santoshpatil@alltaxfin.com

 

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