AGRICULTURAL INCOME

What is meant by agricultural income and explain its types? Is it taxable in Pakistan? Give at least five example of agricultural income and five example of income? Which although derived from land yet are not agricultural?

Meaning of agriculture income

Agriculture income means and includes: Income derived from land. Land is situated in Pakistan. Land is used for agricultural purpose. MEANING Agriculture: Agriculture means cultivation process but it does not means production construction or manufacturing. Income: Income means rent or revenue rent is the amount received by landlord. Revenue is the return production or yield from land. EXPLANATION (1) Income from land: (i) Rent: If the land lord gives his land on rent for agricultural purpose. Then it will be consider as agriculture purpose. Then it will be consider as agriculture income. Example: Rent received by lesser from lessee of an agricultural land. (ii) Cultivation: If the land lord cultivates the land himself or by his subordinate, then the income derived will be agriculture income. Example: Income earned from selling standing crops i.e. growing tea. (iii) Sale of produce: Income received from the agriculture produce sold in the market, either by cultivator or the owner is an agricultural income. Example: Income from sale of sugarcane, maize, wheat. (iv) Sale of produces fit for market: Some time a produce (crops) cannot be sold in to the market with out certain process. If a person is using his land for such process then income received by him is agricultural income. Example: income for threshing of rice or wheat.

(v) Building: Income derived from any building which is: (i) Located on or in the immediate vicinity (attached) of agricultural land. (ii) Use for agricultural purposes. (iii) Owned by the same land lord. Example: Store or god down or dwelling house. (2) Land in Pakistan: Income will be agricultural only in land is situated within the territories of Pakistan. if any Pakistani is the owner of agricultural land which is situated outside Pakistan then that income will not be included in agricultural income. (3) Land used for agricultural purpose: It mean some human labor and effort must be involved in agricultural process. If the produce is grown wild or spontaneously on land it ill not be treated as agricultural income. Example of agriculture income: Any rent received by lesser or land lord of agricultural land. Income received by lessee of agricultural land by cultivation. Income from cultivation of tobacco wheat sugarcane etc. Income from growing tea. Land revenue assigned to jagirdar. Income from building used for agriculture purpose. Fee paid by the tenant for the renewal of lease. Income from growing trees. Income from threshing. Income from sale of standing crops.e.g sugarcane, maize. Example of non agricultural income: Income from textile industries. Income from sugar mills. Income from fisheries. Income from mining and mining royalties. Income from land used as markets. Income from used for storing timbers. Profit from a contract of cutting and selling trees. Income from sale of land for bricks making. Income from jute (ginning) mills. Income from cigarette companies. Income from a flour mills. Example of partly agricultural and partly non agricultural income: Income of a person who grows tea leaves on his own firm in Pakistan and then manufacturing it in to tea. Income of a cigarette company growing tobacco on its own land and manufacturing cigarettes. Income of a sugar mill which grows sugarcane and manufactures sugar.

In the above example growing of crops in an agricultural income and further process which totally change the shape of crops in non agricultural income i.e. income from business and profession.

Taxation of a person having agricultural income

(i) Up to assessment years 1987-88 the agricultural income was not included in the total income of a tax payer. (ii) Through finance ordinance 1988 it was decided that the agricultural income shall be included in total income but only for rate purpose by a person who has business income or he is a director of company and receiving salary. (iii) According to assessment year 2002-03 if a person has agricultural income up to RS. 80,000 along with other income then same tax rates or procedure shall be applied or used as applied on other incomes and if the agricultural income is above Rs.80, 000 in total income then different tax rates or procedure shall be applied. (iv) From tax year 2007, there is no difference in applying tax rates or procedure of calculating tax on taxable income irrespective of the amount of agricultural income. It means same tax rates or procedure shall be used to calculate the amount of tax. Whether the agricultural income is up to Rs 80,000 or more than Rs 80,000. This differentiation in the rates has been with drawn. At present: (1) Rate income tax are same irrespective of the fact whether a taxpayer receives any agricultural income or not. (2) No income tax is charged on agricultural income.