Agriculture Income Tax: Exempt 10(1) + Aggregation + Urban Land (54B)
Farm income is exempt (10(1)) — but if net agri > ₹5k AND total income > exemption, aggregation raises your slab. Rural agri land sale = not even a capital asset (zero tax); urban = CG with 54B relief.
Aggregation (the slab-raiser)
- Rural agricultural land: outside municipal limits + meeting distance/population tests = not a capital asset — sale proceeds fully exempt, no ITR capital-gains entry.
- Urban agri land: normal capital gains — but 54B exempts if you buy other agri land within 2 years.
- Farmhouse + attached land use can qualify — buildings for non-agri use don't.
Aggregation maths: when exempt income raises your tax
- Always disclose agri income in the exempt-income schedule — even though it's exempt. Undisclosed exempt income is the #1 way agriculturalists accidentally manufacture a notice.
- Land sale ≠ agri income: rural land outside municipal limits can be exempt capital gains (not taxable at all), but urban-adjacent land sales are straight capital gains. Know which your survey number falls in.
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in
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Frequently Asked Questions
No — exempt under 10(1). But if net agri exceeds ₹5k and total income crosses exemption, aggregation pushes your other income into a higher slab.
No — qualifying rural agri land is not a capital asset at all, so the sale is fully exempt with no capital-gains entry.
Urban agri land sales face capital gains — but buying other agricultural land within 2 years exempts them. All CG exemptions.