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If the coffee is grown and cured, then the tax liability on the agricultural income is:
Answer & Solution
Correct Answer:
Option
B
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.
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.
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