TaxTMI 
TaxTMI 
26 Oct 2026 
Abbreviations used:
ITA 1961 or 61 Act - The income-tax Act, 1961
ITA 2025 or 25 Act - The income-tax Act, 2025
ITR 1962 or 62 Rules - Income Tax Rules 1962
ITR 2026 Or Rules 2026- Income-tax rules 2026
AY and PY - assessment / previous year in ITA 1961
TY - Tax year in ITA 2025
The meaning of agricultural income as per S.2 (5) of ITA 2025 and S.2(1A) of ITA 1961 will respectively apply.
Provisions from two enactments (Rules) are compared in tabular manner
|
| Income-tax Rules, 1962 - placed in matching manner
| Remarks / observations |
| Rule 270 - Determination of income, being partly from agricultural and partly from business .- | Income which is partially agricultural and partially from business. | Similar. Different style about numbering of Rule. Also about use of long line in ITR 2026. |
| In terms of section 533(2)(b)(i), in case of income, which is partially agricultural income and partially from business, the market value of any agricultural produce which has been raised by the assessee, or received by him as rent in kind, shall be allowed as a deduction, where - | 7. (1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head Profits and gains of business, in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee or received by him as rent-in-kind and | In ITR 2026 Rule 270 reference of Rule making power of CBDT in ITA 2025 is made but definition as per ITA 2025 of agricultural income is not made.
Whereas in ITR 1962 definition of agricultural income as per ITA 1961 is made but there is no reference of section empowering CBDT to make rules. This rule is for agricultural income other than from cultivation and manufacture of Rubber, Coffee, and Tea which are covered by separate Rules although those income are admittedly partially agricultural and partially business under both enactments. |
| (a) such agricultural produce has been utilised as a raw material in such business; or | which has been utilised as a raw material in such business or | Similar, except style difference. |
| (b) sale receipts of such agricultural produce are included in the accounts of the business. | the sale receipts of which are included in the accounts of the business | similar |
| (2) No further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind. | shall be deducted, and no further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind. | Similar in impact but drafted differently. |
| (3) For the purposes of sub-rule (1) "market value" shall be deemed to be, - | (2) For the purposes of sub-rule (1) market value shall be deemed to be :
| Similar in impact but drafted differently. |
| (a) where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant tax year; and | (a) where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant previous year; | Similar in impact but drafted differently. |
| (b) where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process referred to in clause (a), the aggregate of - | (b) where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of- | Similar in impact but drafted differently. |
| (i) the expenses of cultivation; | (i) the expenses of cultivation; | Similar in impact but drafted differently. |
| (ii) the land revenue or rent paid for the area in which it was grown; and | (ii) the land revenue or rent paid for the area in which it was grown; and
| Similar in impact but drafted differently. |
| (iii) such amount as the Assessing Officer finds, having regard to all the circumstances in each case, to represent a reasonable profit. | iii) such amount as the Assessing Officer finds, having regard to all the circumstances in each case, to represent a reasonable profit.
|
Similar in impact but drafted differently.
AO is given wide power and discretion. |
Accounts - are necessary to be maintained:
We find in the Rule following language has been used, relevant portion is reproduced.
| (b) sale receipts of such agricultural produce are included in the accounts of the business. | the sale receipts of which are included in the accounts of the business | Included in account mean credited. |
This is in respect of crop used in business. In such case any other expenses will not be allowed as cultivator or recipient of crop as rent. The amount credited in accounts of business for crop used in business get allowed against business income, therefore, any other deduction is not allowed against agricultural income.
Does this mean that assessee who derives such income has to maintain books of account compulsorily and irrespective of volume of receipts or business?.
And
what will happen if no accounts are maintained or when not credited in accounts?
The Rule is difficult to comply with by farmers to the satisfaction of the AO for the reasons that farmers are generally not organized and agricultural operations include most of filed activities in which maintaining proper books of account and documents are difficult.
Expenses:
As per specific provisions very limited nature of expenses are allowed that is expenses for cultivation of land and rent or land revenue of land from which crop is derived.
There is no rule about other expenses for transportation, marketing and selling of agricultural produce incidental expenses.
The new provisions are just as old but in new style and placing provisions at different places - number of sections and rules. Any change is not intended, however, due to changes in style and wordings, different meaning will be interpreted leading to disputes.