Computation of Net Agricultural Income

For the purpose of computing tax in the case of individuals, Hindu undivided families, etc., having net agricultural income in addition to the non-agricultural income, the net agricultural income for the assessment year 2018-19 will be computed as follows:

  • Rule 1 – Agricultural income of the nature referred in section 2(1A)(a) will be computed on the same basis as is adopted for the computation of income chargeable under the head “Income from other sources” under sections 57 to 59.
  • Rule 2 – Agricultural income of the nature referred in section 2(1A)(b) will broadly be computed as if it were income chargeable to tax under the head “Profits and gains of business or profession” and the provisions of sections 30 to 32, 36, 37, 40, 40A [other than sub-sections (3) and (4)], 41, 43, 43A, 43B and 43C will apply accordingly.
Assessment of Agricultural Income
  • Rule 3 – Agricultural income of the nature referred in section 2(1A)(c) will be computed as if it were income chargeable under the head “Income from house property” under sections 23 to 27.
  • Rule 4 – Where an assessee derives income from sale of tea grown and manufactured by him in India, 60% of the total income from such business, as computed in accordance with rule 8 of the Incometax Rules, will be regarded as agricultural income .
  • Rule 5 – Where the assessee is a member of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) which, in the previous year, has either no income chargeable to tax or has non-agricultural income not exceeding the maximum amount not chargeable to tax in the case of an association of persons or a body of individuals, but has agricultural income, then the agricultural income or loss of the association or body is to be computed in accordance with these rules and the share of the assessee in the agricultural income or loss so computed will be regarded as agricultural income or loss of the assessee.
  • Rule 6 – Loss incurred in agriculture will be allowed to be set off against gains from agriculture. No set off will, however, be allowed in respect of assessee’s share in agricultural loss of an association of persons or a body of individuals.
  • Rule 7 – Any tax levied by a State Government on agricultural income will be allowed as deduction.
  • Rule 8 – The unabsorbed loss from agricultural activities during the previous years relevant to the assessment years 2010-11 to 2017-18 will be set off against the agricultural income of assessment year 2018-19 in chronological order. Likewise, an unabsorbed loss from agriculture during the previous year relevant to the assessment years 2011-12 to 2018-19 will be taken into account in determining the net agricultural income for the purpose of payment of advance tax during the financial year 2018-19. The set off of loss will, in either case, be allowed only if such loss has already been determined. Where a person is succeeded by another person (otherwise than by inheritance), the person (other than the person who has incurred the loss) cannot claim the set off as discussed above.
  • Rule 9 – Where the net result of computation of agricultural income from various sources is a loss, the loss will be disregarded and the net agricultural income of the assessee shall be taken as nil.
  • Rule 10 – The net agricultural income of the assessee will be rounded off to the nearest multiple of Rs. 10.