§10(1) — Agricultural income (exemption & integration)

Agricultural income is EXEMPT under §10(1). But for INDIVIDUALS/HUF/AOP, where NON-agricultural income exceeds the basic exemption limit AND net agricultural income exceeds ₹5,000, the agricultural income is AGGREGATED with total income to determine the SLAB RATE (partial integration) — it raises the rate, though it is not itself taxed.

Key points

• §10(1) EXEMPTS agricultural income from tax.
• 'Agricultural income' is defined in §2(1A): (a) rent or revenue derived from LAND situated in India and used for agricultural purposes;
• (b) income from the performance of AGRICULTURAL OPERATIONS on such land (including processing to make produce marketable);
• (c) income from a FARM BUILDING required for such operations.
• PARTIAL INTEGRATION (the 'aggregation' scheme) applies to INDIVIDUALS, HUFs, AOPs/BOIs and artificial juridical persons (NOT to companies, firms or LLPs) when BOTH: net agricultural income EXCEEDS ₹5,000, AND non-agricultural total income EXCEEDS the basic exemption limit.
• The tax is then computed as: tax on (agricultural + non-agricultural income) MINUS tax on (agricultural income + basic exemption limit).
• This pushes the non-agri income into higher slabs without taxing the agri income itself.
• For composite businesses, Rules 7, 7A, 7B and 8 split income between agricultural and business (e.g. for tea, 60% is agricultural and 40% taxable).
• Integration does NOT apply under the new regime's special-rate computation in the same manner — it follows the slab schedule used.

Reference: §10(1) read with §2(1A) and the annual Finance Act, ITA 1961 — under ITA 2025 (FY 26-27 onwards), this is Sch.II Sl.1