If the coffee is grown and cured then the tax liability...

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If the coffee is grown and cured, then the tax liability on the agricultural income is:

A. 75% agricultural and 25% non-agricultural Income

B. 65% agricultural and 35% non-agricultural Income

C. 55% agricultural and 45% non-agricultural Income

D. 35% agricultural and 65% non-agricultural income

Answer: Option B

Solution (By Examveda Team)

Income from coffee grown and cured by the seller in India is treated as partly agricultural and partly non-agricultural income under the Income Tax Act, 1961.

As per Rule 7B of the Income Tax Rules:
When coffee is grown and cured (but not roasted or grounded), then
65% of the income is treated as agricultural income and exempt from tax
35% of the income is treated as non-agricultural income and taxable under the Income Tax Act

This classification is based on the extent of agricultural vs. processing work involved in the production.

Therefore, the tax liability is calculated on the 35% portion of the total income earned from coffee grown and cured.

This Question Belongs to Commerce >> Income Tax And Corporate Tax

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Comments (2)

  1. Ca Shilpa
    Ca Shilpa:
    6 months ago

    Option A is correct

  2. Rajanikanta Prusty
    Rajanikanta Prusty:
    11 months ago

    Option A is correct

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