Agriculture is an important part of the economy, and it is important to report income from farming activity correctly when filing an income tax return. To do this, there are some specific steps you should follow. Here’s how to show agricultural income in your Income Tax Return (ITR).
Steps for Showing Agriculture Income
1. Calculate the estimated income from agricultural activities by taking into account the total income from all sources, including sales, rent, lease payments, dividends and other investments.
2. Subtract from this figure expenses incurred in relation to the agricultural activity, such as fuel and feed costs, repairs and maintenance, wages etc.
3. Add back any amounts claimed as deductions, including maximum allowances for depreciation, seed, fertilizer, and other expenses.
4.The total figure after deductions should be the taxable income from agricultural activities.
5.Declare this figure in the Income Tax Return (ITR) as ‘Agricultural Income’.
6.Attach a detailed schedule of gross income and expenses, and any other supporting documents to the IT return.
7. Pay any tax due, along with the filing of the return.
Tips for Showing Agriculture Income
1. Keep accurate and detailed records of income and expenses related to agricultural activities, including receipts for all purchases, sales, and other transactions.
2. Verify documents related to agricultural activities prior to submitting them to the department of income tax.
3. Maintain all income related bank statements, taxation documents, etc.
4. Submit the ITR along with the supporting documents on or before the due date to avoid penalties.
5. Ensure that all entries in the return are accurate, and all deductions claimed are eligible.
Law on Showing Agriculture Income
1. The income tax law requires taxpayers to declare any agricultural income that exceeds a certain amount, even if the income is not taxable.
2. The amount subject to taxation is Rs 5000 per annum as per the latest income tax regulations.
3. In certain cases, such as contract farming, or farmers participating in a crop insurance scheme, the taxable income may be higher.
4. Pay the applicable tax due on such income, as the income from agricultural activities is taxable.
5. Claim deductions for eligible expenses such as interest on loans for agricultural activities, depreciation of farming equipment etc.
Benefits of Showing Agriculture Income
1. Filing an income tax return allows Agricultural Income to be duly documented.
2. By showing agriculture income in IT returns, a farmer or agricultural activity operator can avail of deductions on eligible expenses.
3. It also helps to create a record of the agricultural income which can be used at later dates for tax filing and audit purposes.
4. Showing agricultural income helps to make sure you do not miss out on any eligible tax deductions.
5. Reporting agricultural income accurately shows the tax bureau that you are compliant with the income tax laws.
Risks of Not Showing Agriculture Income
1. Not reporting agricultural income accurately can attract penalties and fines from the tax authorities.
2. It may also lead to an audit as the income tax department keeps a database of all reported incomes.
3. Not showing agricultural income reduces the chances of availing deductions and exemptions.
4. Not filing a tax return on time may also lead to interest being charged or the imposition of a penalty.
5. Showing agricultural income late may also impact the farmer’s reputation in the long run.
