Agriculture income is an important source of income for many Indians and needs to be declared in income tax returns. Form ITR-2 is the relevant return form filed by individuals and Hindu Undivided Family (HUF) having income from sources other than salary, house property and lottery winnings. Declaring and showing accurate and non-repetitive agriculture income in ITR-2 can be a tedious task. In this article, we’ll look at where to show agriculture income in ITR-2.
Firstly, in the Income Computation & Disclosure Standards (ICDS) section (Part B of the ITR-2 return form) of the form, one can declare the agriculture income if it is more than Rs. 5,000, in a single financial year. The return form asks for details, such as the nature of agriculture income and total agricultural income. One has to add agriculture income in this section and it should be reflected in the total income amount.
The second place to mention the agriculture income is in Schedule AL (Asset & Liability) of ITR-2 form. There, agricultural land and its liabilities should be disclosed and the total value of assets should be enhanced by including the value of the agricultural land as per prevailing agricultural land prices. It should be mentioned that agricultural income typically falls under the head ‘income from other sources’.
The third area where agriculture income can be declared is in Schedule HP (Income from House Property). This agriculture income should be declared at the place of block 26, which would require details such as the name of the land, survey number, ownership of the agricultural land, date of acquiring it, total area of the land etc. This part also needs to reflect whether taxes have been paid on the agricultural income.
The fourth and final area where one should mention the agriculture income is in Schedule BP (Income from Business or Profession). This section is applicable to most agricultural activity including trading of products grown from the agricultural land. While filling out the particulars in this section, one should mention the nature of the business and its profit and loss accounts. This section also should consider any deductions like rent or household expenses to be allowed for.
Disclosure Norms for Agriculture Income
Certain norms regarding disclosure of agriculture income are applied, according to the Income Tax Act and other government regulations. Firstly, agriculture income is not taxable in the hands of the person earning it unless his/her income from all other sources, excluding agriculture income, exceeds the basic exemption limit. Secondly, if the agriculture income is more than Rs. 5,000 in a single financial year, then it is mandatory to include it in the return form and applicable taxes will be applicable.
Additionally, if the agriculture income has been earned by renting out agricultural land, then it will be treated as income from house property. Likewise, if the agricultural land is sold, then the capital gains arising out of it, will have to be declared in Schedule CG (Capital Gains) of ITR-2 and relevant taxes will apply.
Exemptions from Taxation
In some cases, though an individual or HUF has earned agriculture income, it is still exempt from taxation. This includes if the agricultural income is from the following sources:
- Income from Government’s agricultural relief schemes.
- Income from crop or vegetable land in lieu of investment made for developing agricultural projects.
- Income from production of natural milk.
- Income from sale of animal milk and milk products.
- Income from sale of Unspecified Seeds and Plants.
- Income from any other products of agricultural origin.
Exemptions and Losses
Certain exemptions can be availed when computing the income from agriculture income. These exemptions include the following:
- Exemptions under the Agriculture Land Act of India.
- Deduction for land development expenses.
- Deduction for expenditure for renovation of dilapidated buildings.
- Deduction for expenditure incurred on scientific land improvement.
- Deductions for loss from agriculture activities.
Declaring Agriculture Income in ITR-2
The income tax return form ITR-2 is a combined form which is applicable for individuals, Hindu Undivided Family (HUF) and firms. This form contains sections to declare income from various sources like salary, house property, lottery winnings, business and agricultural income.
While filling up the ITR-2, individuals and HUFs need to declare the agricultural income in this form, if it is more than Rs. 5,000 in a single financial year. The declarations should be made in the relevant sections, including Income Computation & Disclosure Standards (Part B of ITR-2 Form), Schedule AL, Schedule HP, Schedule BP and Schedule CG. Additionally, one should also ensure that one is not claiming any exemptions or deductions for which one is not eligible.
Mentioning Exemptions
If one is eligible for certain exemptions with respect to income from agriculture activities, then it is important to mention them while declaring the agriculture income. In some cases, these exemptions would require specific applications to be filed with the income tax assessing department. Some of the exemptions include exemptions under the Agriculture Land Act of India and deductions for land development expenses, expenditure for renovation of dilapidated buildings and expenditure incurred on scientific land improvement.
Taxability of Agriculture Income
Whether the agriculture income is taxable or not, depends on two factors. Firstly, agriculture income is not taxable in the hands of the person earning it unless his/her income from all other sources, apart from agriculture income, exceeds the basic exemption limit. Secondly, if the agriculture income is more than Rs. 5,000 in a single financial year, then it is mandatory to include it in the return form and applicable taxes will be applicable.
Conclusion
In summary, agriculture income is an important source of income for many Indians and is required to be declared in income tax returns. Form ITR-2 is the relevant return form filed by individuals and Hindu Undivided Family (HUF) having income from sources other than salary, house property and lottery winnings. While declaring the agricultural income, one should be aware of the various sections where it needs to be mentioned and necessary exemptions and deductions, if applicable.
