AGRICULTURAL INCOME

Q1. Mr. A submits the following information regarding his income for the previous year 2010-11: i) ii) iii) iv) Gross salary per annum 5,06,000 Rent received @Rs. 2,500 p.m. 30,000 Agricultural income 60,000 NSC (VIII Issue) purchased on 25.3.2011 20,000

Compute his taxable income and tax liability for the assessment year 2011-12.

Ans. Income from salary Salary Less: Deduction Income from house property Rent Less: Standard Deduction@30% Gross total income Less: Deduction u/s 80C Total income Computation of tax Step 1: Tax on 5,07,000 + Agricultural income 60,000 47,400 Step 2: Tax on agricultural income 60,000 + 160,000 6,000 Step 3: Tax under step 1 tax under step 2 41,400 Add: Education cess & SHEC @3% 1,242 42,642 (rounded off to 42,640) 5,06,000 Nil 30,000 9,000

5,06,000

21,000 5,27,000 20,000 5,07,000

Q2, Mr. A who is 65 years old and resident in India has rented out his agricultural land to S who uses the same for agricultural purposes. As per the agreement, S will pay the rent in the shape of agricultural produce from the land to A. A has received during the previous year, agricultural produce valued at Rs. 60,000. He has consumed agricultural produce worth Rs. 40,000 for his own consumption and the balance has been sold by him for Rs. 20,000. Compute the total income for the assessment year 201112 assuming he is getting a salary of Rs. 20,000 p.m. from Y ltd and has deposited Rs. 15,000 in PPF. He has no other income. Also, compute the tax payable by him.

Ans. Computation of total income of A (For A.Y. 2011-12) Income from salary Salary 20,000 x 12 Less: Deduction 2,40,000 Nil 2,40,000 Exempt 2,40,000 15,000 2,25,000

Agricultural income Rs. 60,000 Gross total income Less: deduction u/s 80C Total income

Since total income is Rs. 2,25,000 which is not more than the maximum exemption limit, there will be no integration of agricultural income for tax purposes.

Q. R is the owner of a flour mill and some agricultural land near the mill. During the year 2011-12, he has shown a profit of Rs. 36 lacs from the business of flour mill. Scrutiny of accounts reveals that he has used 5,000 quintals of wheat produced in his own farms and cost of this wheat has not been debited to P&L A/C. The market price of the wheat during the season was Rs. 600 per quintal. Compute his agricultural and business income and calculate the tax payable by him assuming he does not have any other income. The cost of cultivation of wheat (which includes cost of seeds, manure and fertilizers, etc.) was Rs. 18,00,000.

Ans. COMPUTATION OF AGRICULTURAL BUSINESS INCOME OF MR. R (FOR A.Y. 2011-12) Net profit as per P&L A/C 36,00,000 Less: Cost of wheat brought from own 30,00,000 farms at market price (600 x 50,000) Business income 6,00,000 Agricultural income Less: Market value of wheat Cost of cultivation AND

30,00,000 18,00,000 12,00,000

Tax on agricultural and non agricultural 3,94,000 income 12l + 6l Tax on agricultural income and exemption 2,62,000 limit 12l + 1.6l 1,32,000 Add: education cess and SHEC @3% 3,960 1,35,960