CA Intermediate · Taxation · Basic Concepts

Ms. Riya Shah, a resident individual, has the following receipts in tax year 2026-27: salary Rs 7,00,000 (taxable), agricultural income from a farm in Punjab Rs 3,00,000, and interest on bank deposits Rs 50,000. Assuming she is taxed on income under the regime where basic exemption limit is Rs 4,00,000 and the agricultural income is to be integrated for rate purposes, what is the correct statement about the agricultural income?

The agricultural income is exempt from total income but is included for working out the tax rate, because it exceeds Rs 5,000 and her non-agricultural income exceeds the basic exemption limit. This is the partial integration method, so it is not fully ignored.

1. AIt is fully exempt and is ignored for all purposes of computing tax
2. BIt is exempt from total income but is added to total income for determining the rate of tax, since the non-agricultural income exceeds the basic exemption limit and she has agricultural income above Rs 5,000Correct
3. CIt is taxable as business income at a flat 30%
4. DIt is taxable as income from other sources under normal rates