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June 2025

Agricultural Income Revisited

By Prince George, Chartered Accountant
Reading Time 20 mins

Agricultural income has always been the subject matter of discussion among professionals. It has enjoyed an uninterrupted exemption for more than a century. The same is sought to be continued in the Income Tax Bill 2025. The bill makes some cosmetic changes in the concept of agricultural income as envisaged.

The objective of this article is to explore the idea of Agricultural Income and examine all the relevant provisions, key judgments, and Constitutional mandates. In the course of the article, the author has taken the liberty of sowing the seeds of his views.

CONSTITUTIONAL MANDATE AND DEFINITIONS

The story begins with Entry 82 of the Union List of the 7th Schedule of the Constitution of India, which empowers the Union to levy tax on Income other than Agricultural Income. Entry 46 of the State List makes tax on Agricultural income a State subject. In fact, many states (like Bihar, Odisha, Tamil Nadu, West Bengal, and Maharashtra) have passed legislation to this effect, making Agricultural Income taxable in those States, though the implementation or enforcement of those statutes could be a matter of debate.

Under Article 366(1) of the Constitution, Agricultural Income means “agricultural income as defined for the purpose of enactments relating to Indian Income Tax”. The Income Tax Act 1961 defines “A

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