UPSC Prelims 2025 · Question 35 of 100
UPSC Prelims 2025 question on Agricultural Income Tax Exemption
- ExamUPSC CSE
- Year2025
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicTaxation
- DifficultyMedium
- TypeAssertion
Consider the following statements:
Statement I:
In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.
Statement II:
In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.
Which one of the following is correct in respect of the above statements?
Show answer
Answer: D. Statement I is not correct but Statement II is correct
Statement I – INCORRECT: Agricultural income is specifically defined under the Income Tax Act and is exempted from Income Tax. However, income from allied agricultural activities like poultry farming, dairy farming, and bee hiving are examples of non-agricultural income. Income from poultry farming is NOT exempted from taxation. Hence Statement I is not correct.
Statement II – CORRECT: Under the Income-tax Act, 1961 of India, rural agricultural land is not considered a 'capital asset', and hence any gain arising from its sale is not taxable as capital gains. Under section 2(14), the term 'capital asset' excludes agricultural land in India situated outside municipality/cantonment jurisdiction and beyond specified distances. Hence Statement II is correct.
Statement I is not correct but Statement II is correct → Option (d).