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Partial Taxation of Non agricultural income

Amit (84 Points)

10 May 2007

I would like to ask the learned members the method of calculation of Tax for the AY 2006- 07 if an individual has Agricultural Income of Say 1.50 Lacs and Business Income of 2.75 Lacs. Further, the individual invests Rs, 1.00 Lacs in securities coverd U/s 80C.

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14 Replies

Ishan Behal (19 Points)
Replied 10 May 2007

HI...AS FAR AS I KNOW AGRICULTURAL INCOME SHOULD BE RURAL AGRICULTURAL INCOME..THAT IS THE AGRI FARM SHOULD BE IN A PLACE ATLEAST 8KMS AWAY FROM A CITY OR ITS MUNICIPALITY AND SHOULD HAVE A POPULATION OF LESS THAN 10,000 PEOPLE. IF YOU MEET THE ABOVE RULES THEN ALL YOUR AGRI INCOME IS TAX EXEMPT. BUT ONLY FOR CALCULATING THE TAX SLAB YOU WILL FALL IN ( IE-10% OR 20% OR 30%) YOU WILL HAVE TO ADD YOUR TOTAL AGRI INCOME WITH YOUR BUSINESS INCOME MINUS AMMOUNT INVESTED IN SECTION 80C. ONCE YOU KNOW YOUR TAX SLAB , CALCULATE YOUR TAX PAYABLE ONLY ON YOUR BUSINESS INCOME WITH THAT TAX SLAB. SO I OTHER WORDS...AGRI INCOME IS USED ONLY FOR CALCULATING ONES TAX SLAB BUT THE INCOME ITSELF IS TOTALLY EXEMPT.

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Amit (84 Points)
Replied 10 May 2007

Thanks for your reply but I shall be grateful if you can kindly illustrate with computation.

Gayathri Kumar (55 Points)
Replied 10 May 2007

Hi Amit

This is the tax computation:

Agri inc - 150000
Non- agri - 275000

A. Agri + Non-agri = 150000+275000 = 425000
B. Agri + basic exemption limit = 150000 + 100000 = 250000

Tax on A: 77500
Tax on B: Tax = 25000
Tax on A- Tax on B = 77500-25000=52500

Income computation:
Non- agri inc 275000
less: 80C 100000

GTI 175000

Tax 52500
add: edu cess 2% 1050
Total tax = 52500+1050=53550

Regards
Gayathri

Amit (84 Points)
Replied 10 May 2007

Ms.Jayathri,
Thanks for the computation but doesnot it seems that Tax has been paid on the amount of Rs. 100000/- exempted U/s. 80C.
Thanks in advance if you can throw light on same

Nveerraju (37 Points)
Replied 10 May 2007

Hi Amit

I just made few corrections:

Calculation of Rebate on Agricultural Income & Tax Payable:

Agri inc - 150000
Non- agri - 175000 (275000-100000) Non-Agricultural income should be taken after Chapter VIA Deductions

A. Agri + Non-agri = 150000+175000 = 325000
B. Agri + basic exemption limit = 150000 + 100000 = 250000

Tax on A: 47500
Tax on B: Tax = 25000(Rebate)
Tax on A- Tax on B = 47500-25000=22500 (Tax Payable)

Income computation:
Non- agri inc 275000
less: 80C 100000

Total Taxable Income: 175000
Add: Agricultural Income : 150000
Total Income on which tax
payable 325000
Tax on the above 47500
Less: Rebate on Agri.Income 25000
Tax Payable 22500
add: EC @ 2% 450
Total Tax payable 22950

Regards
Veerraju

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Friend (124 Points)
Replied 10 May 2007

Hi I just came across this post. but 1 thing I have to say..
For Assessment Year 2006-2007 the age of the assessee and whether he/she is male /female is important. So inorder to give a correct computation age and sex of assesee is important

Friend (124 Points)
Replied 10 May 2007

With Reference to my previous post this was the point I was making

Agricultural Income:
Integration of agricultural income with non-Agricultural income
Previously integration of Non-Agricultural Income and Agricultural Income was done if Agricultural Income exceeded Rs. 5,000 and Non-Agricultural Income exceeded Rs. 50,000, but with effect from assessment year 2006-07 it shall be done if Non-Agricultural Income exceeds Rs. 1,00,000.For females this limit shall be Rs. 1,35,000 and for senior citizens it shall be Rs. 1,85,000.

Thanks

Shankar (58 Points)
Replied 10 May 2007

friend

it is very clear in i.t. act that during the finanical year ie form 1st april till march 31 if assess cross age of 65 , he/she will get tax exempt income up to rs. 1.85 lacs . there is no diff between sex in this clause . therefore whether lady or gently any one get this benefit

Friend (124 Points)
Replied 10 May 2007

If an assessee is an Individual above 65 years then basic exemption limit is 1.85 lakhs
If an assessee is an individual WHO BEING A WOMAN resident below 65 then basic exepmtion limit is Rs 1.35 lakhs
And Individual not covered in above 2 cases will get basic exepmtion limit Of rs 1 lakh..
So sex of individual is important

Cagaurav (58 Points)
Replied 10 May 2007

Mr. VeerRaju

The point and example which was given by ms. gayathri is right. u have some problem in ur concept or u should keep in mind agricultural income does not part of total income so question of deduction under chapter vi or 80 ccc to 80 c doesn't arise.

But ms. gayathri is right on her point and the example given by her is the best example. so plz.. n plz.. clarify ur point.

Regards
Gaurav Rastogi
9313198281

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Amit (84 Points)
Replied 10 May 2007

Mr. Rastogi,
In light of the original problem given by Mr. Amit, can you pl. illustrate the tax computation.

Nveerraju (37 Points)
Replied 10 May 2007

Mr. Gaurav

Stop confusing everyone here. Your understanding about the concept is very well understood since, you are telling that Ms.Gayathri's computation is correct.

The best solution for this problem is calculate tax considering Agricultural Income and again calculate tax without taking agricultural Income and compare the results.

In the original question asked by Mr.Amit an individual has non agricultural income of Rs.2.75 Lacs and the he has invested Rs.1.00 U/s 80C. His total taxable income is Rs.1.75 Lacs [Rs.2.75 lacs - Rs.1.00 Lac] without taking Agricultural Income into account. Out of Rs.1.75 Lacs Rs.1.00 Lac is exempted assuming Individual is a Non woman assessee under the age of 65 years.
The balance Rs.75,000 is taxed as follows:
Rs.50,000 @ 10% = Rs.5000
Rs.25,000 @ 20% = Rs.5000
-----------
Rs.10,000
E.C. @ 2% Rs.200
-------------
Total Rs.10,200

Since the Individual has Agricultural Income of Rs.1.5 Lacs the above Rs.75,000 is Taxed at 30% i.e., 30% of Rs.75,000 = 22,500 + 450 (EC) =Rs.22,950

Individual has different slab rates upto Rs.1.5 Lacs after basic exemption of Rs.1.0 Lac. Since in the present problem has 1.5 lacs agricultural income, I have taken Rs.75,000 at 30% otherwise it has to be calculated taking different slabs into account if agricultural income is less than 1.5 lacs.

Ms.Gayathri in her computation arrived at Rs.53,550 Tax for Rs.75,000 (71.4%). This itself shows that her calculation is wrong.

Agricultural Income is included in Total Income only for rate purpose. Since, an Individual is taxed at different rates clubbing agricultural income will lead to tax the non agricultural income at higher rate in the slab rates.

Mr. Gaurav, my suggestion for you is first refer some standard book for better understanding about taxing agricultural income and you will understand who has the problem in understanding.

Thanks & Regards
Veerraju

Cagaurav (58 Points)
Replied 10 May 2007

Hello Sir,

Why r u getting angry

I am clarifying this problem with a example.

Assessee has a non agricultural income ===> Rs. 275000

And having agricultural income=====> Rs. 150000

Assesse is a non woman assessee under age of 65

Computation of Total income and Tax Liability
for the assessment year 2006-2007

Inocme From Business( assuming non agricultural income)= Rs. 275000

Less Deduction under section 80 C=====> Rs. 100000

Total Income -------------------
Rs. 175000

Tax on above income (175000+150000)====> Rs. 47500

Tax on Rs. (150000+100000)==============> Rs. 25000

Net Tax Liability====> Rs. 22500
Add:- E.Cess ====> Rs. 450
=======
Tax Liability ====> Rs. 22950

But veerraju i was earlier saying this thing where is my fault

if u can contact me then plz. mail me at cagaurav1234 @ gmail.com or contact me at 9313198281

Gaurav Rastogi

Nveerraju (37 Points)
Replied 10 May 2007

Mr. Gaurav

Just read all chain of replies to this issue. Finally, you came to right conclution for issue. There is no point in further discussion on this issue.

Thanks
Raju