Agricultural income is fully exempt from income tax under Section 10(1) of the Income-tax Act, 1961 — there is no tax on income from cultivating or renting agricultural land in India. But under the partial integration rule, if you also have non-agricultural income above the basic exemption limit and your agricultural income exceeds Rs 5,000, the farm income is added only to fix the tax rate on your other income. The agricultural income itself is never taxed. It must still be disclosed in Schedule EI of your ITR.
Being exempt under Section 10(1) means agricultural income bears no tax of its own. It does not mean you can leave it off your return — high or undisclosed "agricultural income" is a common scrutiny trigger. Report it in Schedule EI, and where the partial-integration threshold is crossed, in Schedule AI as well.
What Counts as Agricultural Income?
Section 2(1A) defines agricultural income in three broad limbs: rent or revenue from agricultural land in India, income from agricultural operations on that land (basic processing to make produce marketable), and income from a farm building connected to the land. Anything outside these limbs is normal taxable income.
| Income source | Agricultural? | Treatment |
|---|---|---|
| Cultivation of crops (wheat, rice, sugarcane, cotton) | Yes | Exempt u/s 10(1) |
| Rent / revenue from agricultural land in India | Yes | Exempt u/s 10(1) |
| Nursery — growing saplings / plants | Yes | Exempt (deemed agricultural) |
| Tea grown and manufactured (Rule 8) | Part | 60% exempt, 40% taxable |
| Poultry, dairy, fisheries, standalone animal husbandry | No | Taxable — business income |
| Agricultural income from land outside India | No | Taxable — other sources |
Tea 60/40 under Rule 8; coffee and rubber follow Rules 7A/7B. Basic processing to make produce marketable stays agricultural; manufacture beyond that is business income.
How Partial Integration Works
Partial integration (the "aggregation" method in the annual Finance Act) applies only when both conditions are met — otherwise agricultural income is simply left out of the tax computation.
- The taxpayer is an individual, HUF, AOP, BOI or AJP (not a company, firm or LLP), and
- Net agricultural income exceeds Rs 5,000 and non-agricultural income exceeds the applicable basic exemption limit.
The subtraction in Step 2 removes any tax attributable to the farm income, so the agricultural income is never taxed — it only lifts the average rate applied to your other income. The basic exemption used is Rs 4,00,000 under the default new regime and Rs 2,50,000 (Rs 3,00,000 / Rs 5,00,000 for senior / super-senior) under the old regime for FY 2025-26.
Partial integration applies to individuals, HUFs and similar persons taxed at slab rates. A company or partnership firm is taxed at a flat rate, so there is no rate to "lift" — its agricultural income stays exempt without any aggregation. Some states also levy their own agricultural income tax on plantation income, separate from central tax.
Partial Integration — A Simple Illustration
Take a resident individual on the new regime with Rs 8,00,000 salary/business income and Rs 3,00,000 net agricultural income. The farm income is added only to set the rate. Figures below are illustrative at FY 2025-26 new-regime slabs, before the Section 87A rebate and 4% cess.
Step 1 Tax on aggregate
Step 2 Tax to remove
Tax payable = Rs 45,000 − Rs 15,000 = Rs 30,000 (before rebate and cess) — the same as tax on the Rs 8,00,000 alone, because the new-regime slabs here are proportionate. The mechanism matters most in the old regime and at higher incomes, where aggregation genuinely pushes non-ag income into a higher bracket. Use our income-tax calculator to test your own figures.
The rupee figures above are rounded for explanation only and ignore the 87A rebate, surcharge and 4% cess. Your actual liability depends on your regime, exact slabs and rebates — always compute on the live figures or have it verified before filing.
Where to Report Agricultural Income in Your ITR
| Situation | What to report | ITR form |
|---|---|---|
| Agricultural income up to Rs 5,000 | Schedule EI (exempt income) only | ITR-1 / ITR-4 (if otherwise eligible) |
| Agricultural income above Rs 5,000 | Schedule EI + Schedule AI (with land / district details) | ITR-2 or ITR-3 |
| Farm income + business/profession | Schedule EI/AI, business income in the P&L | ITR-3 |
ITR-1 (Sahaj) cannot be used once net agricultural income exceeds Rs 5,000; move to ITR-2 (or ITR-3 with business income).
- Land ownership / lease records
- Crop sale bills & mandi receipts
- Rent/revenue receipts from tenants
- Expense vouchers (to arrive at NET agricultural income)
- Bank statements evidencing farm receipts
- Schedule EI completed for all farm income
- Schedule AI completed if above Rs 5,000
- Correct ITR form (ITR-2/3 above the threshold)
For both the Rs 5,000 aggregation test and Schedule AI, use net agricultural income — gross farm receipts less the expenses incurred to earn them. Reporting gross income can overstate the rate impact and invite questions on unexplained cash.
Farm income plus salary, capital gains or business? Let a CA file it right.
Get ITR Filing Help →Agricultural Income — Frequently Asked Questions
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Farm Income Plus Other Income? File It Right
Agricultural income is exempt, but partial integration and Schedule EI/AI disclosure trip up many returns. TaxClue's CA-led team computes the aggregation, picks the correct ITR form and files accurately — 100% online, across India.