With effect from assessment year 1974-75, the agricultural income is integrated with Non-agricultural income in certain cases of assessees. The integration is done only in those cases where assessee has both agricultural and non-agricultural incomes. In this part we have to study the computation of Net Agricultural income and rules regarding integration of agricultural income with non-agricultural income.
What to Integrate?
(a) Non-agricultural Income. It is the computed total income of assessee as per the provisions of Income-tax Act, 1961.
(b) Net Agricultural Income. It is the agricultural income computed in accordance with the rules laid down under section 2(IA) of the Income-tax Act, 1961 and rules 7 and 8 of the Income-tax Rules 1962. These rules are
1. Rent or revenue derived from agricultural land will he computed on the same basis as adopted for computation of income under the head “income from other sources” under sections 57 to 59 of the ‘Income-tax Act’.
2. Income derived from agricultural operations will be computed as if it is income chargeable to tax under the head “Profit & Gains of Business or Profession”. All the provisions of sections 30, 31, 32, 34, 36, 37, 38, 40, 40A, 41, 43, and 43A of this Act shall be applicable. Depreciation and loss on the death of animals used in agricultural operations are allowed as expenses.
3. Income derived from agricultural house property will be computed as if such income is chargeable to tax under the head “Income from house property” and provisions of sections 23 to 27 shall be applicable.
4. For computing share of income from tea business income as computed under rule 8, shall he considered to be agricultural income.
5. For computing share of income or loss from the agricultural income of an AOP same rules are applicable as are provided in Income-tax Act for computing the share of profits or losses from an AOP.
6. Loss incurred in agriculture will be allowed to he set off only against gains from agriculture. The share of loss of a member from an AOP shall not be allowed to be set off from his own agricultural income.
7. Any sum payable by the person on account of any tax levied by State Government on Agriculture will be allowed as deduction.
8. Where the net result of agricultural income from the various sources stated above in a particular previous year is loss, the loss will be disregarded and net agriculture income shall be taken to he nil.
When to Integrate?
(a) Integration is done only in case of (1) Individuals, (ii) Hindu Undivided Families, (iii) Association of persons, (v) Bodies of individuals, and (vi) Artificial juridical persons.
(b) Integration is done only if Non-agricultural income of all persons mentioned above exceeds exempted limits, [i.e., Rs. 1,50,000 in case of an individual, Rs. 1,80,000 in case of a female below the age of 65 years and Rs. 2,25,000 in case of a senior citizeni in the relevant previous year.
(c) Integration is done only if Net Agricultural income of all these persons exceeds Rs. 5,000 in the relevant previous year.
When not to Integrate?
(a) Integration is not done in case of (i) firms ; (ii) Companies ; (iii) Co-operative Societies; and (iv) Local authorities.
(b) No integration if Non-agricultural income of all persons mentioned earlier does not exceed Rs. I ,50,000, in the relevant previous year.
(c) No integration if the Net agricultural income does not exceed Rs. 5,000 in the relevant previous year.
How to Integrate?
1. Net Agricultural income is added with the Non-agricultural income if conditions given above are fulfilled.
2. Tax is calculated on this total at current rates of tax.
3. Net Agricultural income is added with the exempted limit. i.e. Rs. 1,50,000.
4. Tax is calculated on this total at current rates of tax.
5. Tax calculated at point (4) is deducted out of tax calculated at point (2) above.
6. On balance tax add surcharge @ 10% of such tax if non-agricultural income exceeds Rs. 10,00,000.
7. Add education cess @ 2% + Secondary and Higher Education cess @ 1% of such tax + surcharge, if any.
8. Total is tax payable.
9. Tax payable to be rounded off to the nearest multiple of ten