Agricultural Income & Capital Gains 2025: Complete Tax Exemption & Compliance Guide | CA Sandeep Rawat

Agricultural Income & Capital Gains on Transfer of Land – Complete Tax Guide 2025

1. What is Agricultural Income? [Section 10(1)]

Agricultural income is exempt from central income tax under Section 10(1). The central government has no power to tax agricultural income. It includes:

• Income of cultivators or landholders, including rent or revenue from agricultural land.
• Income from cultivation, processing to make produce market-ready, or sale of agricultural produce.
• Income from farm buildings used for agricultural operations.

Partial Integration of Agricultural Income

Partial integration applies to individuals, HUF, AOP, BOI, and artificial juridical persons to tax non-agricultural income at higher rates. Conditions:

• Net agricultural income exceeds ₹5,000 p.a.
• Non-agricultural income exceeds the basic exemption limit (₹2,50,000–₹5,00,000 depending on age).
• Companies, LLPs, firms, co-operative societies, and local authorities are excluded.

2. Transfer of Agricultural Land – Capital Gains [Section 45]

Profits or gains from transfer of a capital asset are taxable under Capital Gains. Key points:

Capital Asset [Section 2(14)]

• Includes property held by the assessee and securities held by Foreign Institutional Investors.
• Excludes: stock-in-trade, personal effects, and rural agricultural land (non-specified area).
• Urban agricultural land is considered a capital asset; transfer attracts capital gains tax.

3. Exemptions on Capital Gains from Agricultural Land

3.1 Exemption under Section 10(37)

Capital gains from compulsory acquisition of urban agricultural land are exempt if:

• Land was used for agriculture in preceding 2 years by individual/HUF or parent.
• Compensation received on or after 1.4.2004.

3.2 Exemption under Section 54B

Applicable for Individual & HUF transferring urban agricultural land:

• Land must be used for agriculture in preceding 2 years.
• Purchase new agricultural land within 2 years of transfer.
• Capital gains exempt up to cost of new land; excess deposited under CGAS if not reinvested.

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Contact for Professional Assistance

For expert guidance on agricultural income, capital gains, and exemptions, connect with:

• Email: sandeeprawatca@gmail.com
• Phone: 9315776867

Professional advisory by CA Sandeep Rawat, SRTConsultancy & Co.