Tax · Guide

Agricultural income: exempt, but it can raise tax on your salary

Short answer

Agricultural income is exempt from income tax. But if it exceeds Rs 5,000 and your other income is above the basic exemption limit, it is used to work out the rate on your other income, a method called partial integration. You pay no tax on the farm income itself, but your salary can be taxed more.

Many salaried families own farmland that earns rent or crop income. That income is exempt, but it is not ignored: above a small threshold it is added in to decide which slab your salary falls into, then the tax on the farm income is taken out again.

By FinancePaisa Editorial Team · Research & editorialUpdated 22 October 2026 · 2 min read

On this page (5 sections)

What counts as agricultural income?

Rent or revenue from agricultural land in India.
Income from farming the land, and from processing the produce in ways needed to make it marketable.
Income from a farmhouse on or near the land, used in connection with farming, subject to conditions.
Interest, dividends and gains from selling urban land are not agricultural income.

How does partial integration work?

Three steps, using your regime's slab rates:

Step 1: tax on non-agricultural income plus agricultural income.
Step 2: tax on agricultural income plus the basic exemption limit.
Step 3: tax payable = Step 1 minus Step 2, then add cess.

Worked example: Rs 8,00,000 taxable salary and Rs 2,00,000 from farmland

Old regime slabs, basic exemption limit Rs 2,50,000:

Step	Amount
1. Tax on Rs 10,00,000	Rs 1,12,500
2. Tax on Rs 4,50,000	Rs 10,000
3. Tax before cess (1 minus 2)	Rs 1,02,500
Tax with 4% cess	Rs 1,06,600
For comparison: tax on salary alone, with cess	Rs 75,400

1. Tax on Rs 10,00,000
Amount
Rs 1,12,500
2. Tax on Rs 4,50,000
Amount
Rs 10,000
3. Tax before cess (1 minus 2)
Amount
Rs 1,02,500
Tax with 4% cess
Amount
Rs 1,06,600
For comparison: tax on salary alone, with cess
Amount
Rs 75,400

Frequently asked questions

Is agricultural income fully tax-free?

The agricultural income itself is not taxed. If it is above Rs 5,000 and your other income is above the exemption limit, it can increase the tax on your other income through partial integration.

Is income from selling farmland agricultural income?

No. A sale of land is a capital gains question. Rural agricultural land is not a capital asset, so its sale is not taxed; urban agricultural land is.

Kheti ki kamai par tax lagta hai? Is farm income taxed?

No tax is charged on farm income itself. It only affects the rate on your other income when it is above Rs 5,000.

Sources & references

What is the tax treatment of agriculture income? — Income Tax Department (checked 22 Oct 2026)
Provisions of the Income-tax Act, 1961 vis-a-vis Income-tax Act, 2025 — CBDT

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