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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tax Provisions for Special Cases

Under the Income-tax Act, 1961 as applied to resident individuals, which of the following is the correct description of the tax treatment of agricultural income for a person who also has non-agricultural income?

Agricultural income is exempt from tax, but when it exceeds Rs 5,000 and non-agricultural income is above the basic exemption limit, partial integration is applied so that agricultural income influences the rate of tax on the non-agricultural income.

  1. AAgricultural income is fully taxable at slab rates without any exemption
  2. BAgricultural income is exempt, but is considered for rate purposes through partial integration when specified conditions are metCorrect
  3. CAgricultural income is taxed only at a flat 10 percent
  4. DAgricultural income is taxable only if it exceeds Rs 5 lakh

Explanation

Agricultural income is exempt from tax, but where the net agricultural income exceeds Rs 5,000 and non-agricultural income exceeds the basic exemption limit, partial integration applies, which affects the rate of tax on non-agricultural income. The other options describe treatments that do not exist.

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