Taxation of Agricultural Income

CA V.K. Subramani

It is well known that agricultural income is exempt from income tax. Agriculture falls in State list and income-tax falls in Union list. Entry No.82 of List 1 of the Seventh Schedule empowers the Parliament to levy taxes on income other than agricultural income. Thus, the Central Government cannot tax agricultural income. However, for the limited purpose of computing the income tax at a higher rate it is added to total income for computing income-tax thereon and again such agricultural income is added to basic exemption limit for computing tax and providing the same as deduction. The resultant is the ultimate tax liability of the taxpayer.