Income Tax on Allied Agricultural Activities
Question
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?
Options
Both Statement I and Statement II are correct and Statement II explains Statement I
Both Statement I and Statement II are correct but Statement II does not explain Statement I
Statement I is correct but Statement II is not correct
Statement I is not correct but Statement II is correct
Explanation
Statement I is false. Statement II is true.
Income from poultry, dairy, and wool rearing is not classified as agricultural income under Section 2(1A) of the Income-tax Act and is therefore fully taxable. However, rural agricultural land is expressly excluded from the definition of a "capital asset" under Section 2(14).
Answer: (d).
Question details
Year
2025
Paper
GS Paper 1
Question
Q5
Subject
Economy
Sub-topic
Fiscal Policy, Taxation & Budget
Type
Statement-based
Difficulty
Hard
Nature
Static
Source hint
Income Tax Act 1961
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