Partial Integration of Income: Income Tax in case of Person having both Non Agriculture and Agricultural Income

How to divide Agriculture and Business Income for Income Tax Purpose. So to solve this problem income tax has given scheme of partial integration in which tax payer first calculate income tax on total income including agriculture income then tax payer has to calculate tax on agriculture income which will be allowed as exemption from total income.

Example: Business Income: Rs 450,000/- and Agriculture Income is Rs 65000/-, Total Income is Rs 515000/- . Income Tax on Total Income: 515000/- is Rs 33990/- (Inclusive of Education Cess)

Tax on Agriculture Income is Rs 65000+ Rs 200000/-(Basic Exemption Limit) = Rs 265000/- So Tax on Rs 265000, is Rs 6695/- So Tax payable is Rs 33990 Less Rs 6695/- = Rs 27295/- (Inclusive of Education Cess)

And if You calculate Tax on Only Business Income of Rs 450000/- is Rs 25750/- (Inclusive of Education Cess)

So additional Liability of Rs 1545/- which is tax on agriculture Income @ 10.36% = Rs 15000/-( Rs 5,15,000 – Rs 5,00,000)

The scheme of partial integration of non-agricultural income with agricultural income is applicable if the following conditions are satisfied –

Condition 1

The tax payer is an individual, a Hindu undivided family, a body of individual, an association of person or an artificial juridical person

Condition 2

The tax payer has non-agricultural Income exceeding the amount of exemption limit [i.e. Rs. 2,50,000( in case of a resident senior citizen 60 years or more) and Rs.2,00,000 (in case of any other individual or every HUF) for the assessment year 2012-13 and 2013-14 and 2014-15 ]

Condition 3

The agricultural Income of the tax payer exceeds Rs.5000.

If the three conditions are satisfied, then the scheme of partial integration of tax on non agricultural income with income derived from agriculture is applicable.

It may be noted that, the aforesaid scheme is not applicable in the case of firm, company, co-operative society, etc.

Computation of tax in cases covered by the scheme

In cases covered by the scheme, income tax will be computed for the assessment year 2012-13, 2013-2014 & 2014-15 in the following manner:

Step 1: Net agricultural income is to be computed as if it were income chargeable to income tax.

Step 2: Agricultural and non-agricultural income of the assessee will then be aggregated and income tax is calculated on the aggregate income as if such aggregate income were the total income.

Step 3: The net agricultural income will then be increased by the amount of exemption limit (i.e. the first slab of income on which tax is charged at NIL rate) and income tax is calculated on net agricultural income, so increased, as if such income was the total income of the assessee.

Step 4: The amount of income tax determined as step 2 will be reduced by the amount of income tax determined under step 3.

Step 5: Find out the balance, add education cess and secondary and higher education cess.

Step 6: The amount so arrive will be the total income tax payable by the assessee.

2 thoughts to “Partial Integration of Income: Income Tax in case of Person having both Non Agriculture and Agricultural Income”

  1. if income from post office commission is Rs56000per annum and agricuture income is rs60000 per annum then which ITR form should be used ?

    and is it needed to show the agriculture income in ITR form while the total of income from commission and agriculture income is less than taxable income (less than Rs200000).

    sir please guide

    1. sir
      in my case first and third conditions satisfied but third conditions not satisfied as because total of both commission income and agricuture income is less than taxable income.
      so am i not needed to show agriculture income in ITR and if i have to show agriculture income in ITR then which form should i use ?

      as i know ITR1 can be used if i have to show only commission income but can i show my agriculture income in other income column in ITR1 or i have to use other ITR form to show agricutlure income,
      please guide

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