preliminary

• What is income ?

• What is tax?

section 1 title

definitions

Section 2(A)agricultural income

• Any land utilized to render the produce fit for sale.

• Any income /revenue received from agricultural land situated in India.

• Income derived from any building provided the following conditions are satisfied:

• It is in or around the immediate vicinity of the agricultural land.

• Occupied by the cultivator.

• Used as dwelling or store house or outhouse.

• The land is not in specified areas .

• The land is assessed to land revenue.

Specified area

• Land which is in the jurisdiction of municipality or cantonment board.

and

Population is more than 10000.

or

Notified by the central govt in its official gazette.

Aggregation of agricultural income.

• It is exempt under section 10(1).

• But it included for determining the rate at which the non agricultural income is chargeable to tax.

Steps in aggregation of agricultural income.

Step 1: aggregate the agricultural income with the non agricultural income and determine the amount of tax.

Step 2: aggregate the agricultural income with the basic exemption limit and determine the tax.

Step 3: the difference between the step 1 and step 2 will be the tax payable .

Example for aggregation of agricultural income.

• Mr. Rehman’s total income is 140000 and calculated the tax payable at 4000.but he had not taken into account the non agricultural income of Rs 25000. what is the appropriate tax payable by Mr. Rehman .

step particulars Amount Amount

1 Total income (140000+25000)

Tax on 165000

165000

8000

2 Basic exemption limit + agricultural income(100000+25000)

Tax on 125000

125000

2500

3 Tax payable is

(8000- 2500)

add: cess at 2%

Tatal tax payable is

5500

110

5610

• If the non agricultural income does not exceed basic limit ,no tax is payable on agricultural income.

• If agricultural income is less than 5000,no aggregation is necessary .

• income from Transfer of agricultural land is not agricultural income .but if it is in specified area then it is taxed under section 54B of capital gains.

Agricultural operations

• Basic agricultural operations – it should involve human labour on land .for eg : tilling , sowing, planting etc.

• Secondary agricultural operations –eg:weeding , harvesting.

• Only basic operations – agricultural income .

• Basic and secondary operations – agricultural income

• Only secondary operations – not agricultural income.

Case laws

• Agricultural land used for shooting films i

• Used as beach resort .

• Growing mulberry leaves to feed on silk cocoons .

Key man insurance policy

• When the policy matures in the hands of the employee

• When the policy matures in the hands of the employer

• When the policy matures in the hands of a third party

Gross total income

• Gross total income means total income computed in accordance with the provisions of the income tax act before making any deductions.

Companysec 2(17)

• Any Indian company

• Any body corporate registered outside.

• Any institution already assessed as company in the previous years

• Any institution declared by CBDT as company.

Sec 2(18)widely held companies

• Any company which is owned by govt or reserve bank of India.

• All sec 25 companies

• Nidhi and mutual fund companies.

• Any company where govt or RBI owns more than 40% of shares.

FOREIGN COMPANY

• ANY COMPANY WHICH IS NOT DOMESTIC COMPANY.

DOMESTIC COMPANY

• ANY INDIAN COMPANY.

• ANY OTHER COMPANY WHICH MAINTAINS ITS SHARE REGISTER IN INDIA AND DECLARES AND PAYS ITS DIVIDENT IN INDIA.

INDIAN COMPANY

• Any company which is formed and registered in India.

• Any company established under an Act.

• Any company formed and registered under the laws of Jammu and Kashmir.

• Any company which is registered under the union territories of India.