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Tax Laws and Practice · Basic Concept of Income Tax

Tax Where Total Income Includes Income Not Taxable Under Section 190

Updated 11 October 2026 · Fact-checked

Section 190 of the Income-tax Act, 2025 gives relief when total income includes income on which no tax is payable. You compute tax on the full total income, find the average rate, and deduct tax at that rate on the non-taxable part. Partial integration of agricultural income is a separate computation, covered below.

Understand Tax Where Total Income Includes Income Not Taxable

Some incomes are part of your total income but are not taxed in your hands. Section 190 says that in such a case you get a deduction from the income-tax charged on your total income. The deduction equals tax at the average rate on the amount on which no tax is payable.

The average rate is the tax on the total income divided by the total income, shown as a percentage. This stops the non-taxable part from being taxed through the back door. Without the relief, that part would push the taxable part into a higher slab and you would pay more.

Keep this separate from agricultural income. Partial integration of agricultural income is a different computation. It is not part of section 190, and you should not mix the two methods in one answer. Section 190 gives a deduction at the average rate. Partial integration works by taxing a combined figure and then subtracting a second tax.

Under partial integration, agricultural income is not taxed on its own. For an individual, HUF, AOP or BOI it is added to non-agricultural income only to decide the rate. It applies when two conditions are met: net agricultural income is more than ₹5,000, and non-agricultural income is more than the basic exemption limit.

The idea behind partial integration: agricultural income should raise the slab on which non-agricultural income is taxed, but should not itself be taxed. So you tax the combined amount, then remove the tax on the agricultural income as if it sat on top of the exemption limit. Compute the net agricultural income first, whether the question gives the net figure or gives gross receipts and expenses.

In the exam, the question will give you the slab rates to use. Read them carefully and follow the method step by step.

Key rules to remember

Section 190 relief
Deduction = Average rate × Income on which no tax is payable
The deduction is made from the income-tax charged on total income.
Average rate of tax
Average rate = (Tax on total income ÷ Total income) × 100
Compute tax on the full total income first, including the non-taxable part.
Partial integration: conditions
Net agricultural income > ₹5,000 AND non-agricultural income > basic exemption limit
Applies to individuals, HUF, AOP, BOI and artificial juridical persons. If either condition fails, agricultural income is ignored for rate purposes.
Partial integration: tax
Tax = Tax on (Non-agricultural income + Net agricultural income) − Tax on (Basic exemption limit + Net agricultural income)
Add surcharge and cess on the result, if the question asks for them.

How to solve Tax Where Total Income Includes Income Not Taxable questions

First decide which method the question wants. Section 190 relief and partial integration of agricultural income are two separate computations. Use only one of them for each part of a question.

  1. 1Identify the income that is not taxed in the assessee's hands and decide the method. Use Method A (section 190 average-rate relief) when total income includes income on which no tax is payable. Use Method B (partial integration) when an individual, HUF, AOP or BOI has both agricultural and non-agricultural income.
  2. 2Method A, step 1: compute the tax on the full total income, including the non-taxable part, using the slabs given.
  3. 3Method A, step 2: find the average rate = tax on total income ÷ total income × 100.
  4. 4Method A, step 3: multiply the average rate by the amount on which no tax is payable, and deduct the result from the tax on total income.
  5. 5Method B, step 1: work out net agricultural income by deducting the related expenses. Then check both conditions: net agricultural income above ₹5,000 and non-agricultural income above the basic exemption limit. If either fails, tax only the non-agricultural income.
  6. 6Method B, step 2: add net agricultural income to non-agricultural income and compute Tax A on the total using the slab rates given.
  7. 7Method B, step 3: add net agricultural income to the basic exemption limit and compute Tax B on that sum using the same slabs.
  8. 8Method B, step 4: subtract Tax B from Tax A. This is the tax before surcharge and cess.
  9. 9Add surcharge and cess only if the question asks, and state your conclusion clearly.

Quickest way: Two-tax subtraction for agricultural income

When to use it: Use when the question asks for tax on an individual, HUF, AOP or BOI with both agricultural and non-agricultural income and gives slab rates.

  1. Tick the two conditions first. This saves time if agricultural income is ignored.
  2. Write Tax A on (non-agricultural + agricultural income) in one line.
  3. Write Tax B on (exemption limit + agricultural income) in the next line.
  4. Net tax = A − B. Add cess last.
  5. Check that your answer is not less than zero and not more than the tax on the full aggregate.

Common mistakes in Tax Where Total Income Includes Income Not Taxable

  • Taxing the agricultural income in full along with other income.

    Students see it inside the aggregate and forget it is not taxed in itself.

    Fix: Always subtract Tax B. That step removes the tax on the agricultural income.

  • Skipping the two conditions for partial integration.

    Students jump straight to the computation.

    Fix: Test the ₹5,000 limit and the basic exemption limit first, and say so in the answer.

  • Using gross agricultural income instead of net.

    The question lists receipts and expenses separately and students miss the expenses.

    Fix: Deduct the expenses of agriculture and then use the net figure in both tax computations.

  • Computing the average rate on only the taxable part of the income.

    Students think the non-taxable income should be left out of the rate calculation.

    Fix: Section 190 uses the tax on the whole total income. Divide that tax by the whole total income.

  • Using the wrong exemption limit in Tax B.

    The question may give slabs for different assessees and students pick the wrong one.

    Fix: Use the basic exemption limit of the slab table given for that assessee, and add agricultural income to it.

Worked examples

Example 1

Mr. Arjun, a resident individual below 60 years, has non-agricultural income of ₹6,00,000 and net agricultural income of ₹2,00,000. The slabs below are hypothetical, given only for this exercise. They are not the rates under the Income-tax Act, 2025. Use these slabs: up to ₹2,50,000 nil; ₹2,50,001 to ₹5,00,000 at 5%; ₹5,00,001 to ₹10,00,000 at 20%; above ₹10,00,000 at 30%. Ignore surcharge and rebate but add 4% cess. Compute his tax.

Show the solution
  1. Conditions: net agricultural income ₹2,00,000 is above ₹5,000 and non-agricultural income ₹6,00,000 is above ₹2,50,000. Partial integration applies.
  2. Tax A on ₹8,00,000 (6,00,000 + 2,00,000): 5% of ₹2,50,000 = ₹12,500; 20% of ₹3,00,000 = ₹60,000. Total ₹72,500.
  3. Tax B on ₹4,50,000 (2,50,000 + 2,00,000): 5% of ₹2,00,000 = ₹10,000.
  4. Tax before cess = ₹72,500 − ₹10,000 = ₹62,500.
  5. Cess at 4% = ₹2,500.

Answer: Total tax payable is ₹65,000 (₹62,500 plus cess of ₹2,500).

Example 2

Using the same hypothetical slabs (for this exercise only, not the rates under the Income-tax Act, 2025), an assessee's total income is ₹10,00,000, which includes ₹2,00,000 on which no tax is payable in his hands. Compute the tax after relief under section 190. Ignore surcharge, rebate and cess.

Show the solution
  1. Tax on the full total income of ₹10,00,000: 5% of ₹2,50,000 = ₹12,500; 20% of ₹5,00,000 = ₹1,00,000. Total ₹1,12,500.
  2. Average rate = ₹1,12,500 ÷ ₹10,00,000 × 100 = 11.25%.
  3. Deduction under section 190 = 11.25% of ₹2,00,000 = ₹22,500.
  4. Tax payable = ₹1,12,500 − ₹22,500 = ₹90,000.

Answer: Tax payable after the section 190 deduction is ₹90,000.

Exam tips

  • Always write the two conditions for partial integration before computing. Examiners give marks for them.
  • Show Tax A and Tax B as separate lines so part marks are safe even if arithmetic slips.
  • Read the slab table in the question. Use its basic exemption limit, not one from memory.
  • For section 190, state the rule in a line, then compute average rate and the deduction, and end with a clear conclusion.

Practice questions from Basic Concept of Income Tax

Tax Where Total Income Includes Income Not Taxable in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Tax Where Total Income Includes Income Not Taxable: frequently asked questions

What does section 190 of the Income-tax Act, 2025 say?

If total income includes income on which no tax is payable, the assessee gets a deduction from the tax on total income. The deduction equals tax at the average rate of income-tax on that non-taxable amount.

What is partial integration of agricultural income?

It is a method of taxing non-agricultural income at a rate raised by agricultural income. You tax the combined amount, then deduct the tax on the exemption limit plus agricultural income. Agricultural income is not taxed itself.

When does partial integration not apply?

It does not apply if net agricultural income is ₹5,000 or less, or if non-agricultural income is not above the basic exemption limit. In those cases only the non-agricultural income is taxed.

How do I find the average rate of tax?

Divide the tax on the total income by the total income and multiply by 100. Use the whole total income, including the non-taxable part.