Income Tax Bill 2025: Finance Minister Nirmala Sitharaman on Thursday tabled the much-awaited Income Tax Bill 2025, which would replace the 1961’s Income Tax Act. The bill restructures provisions by increasing the number of sections while reducing overall length, enhancing clarity and ease of interpretation.
Experts noted that there has been a notable attempt to streamline and improve the readability of the Income Tax Act by eliminating Provisos and Explanations from sections and adding tables where necessary.
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“The meaning of “agricultural land” as contained in the Income Tax Act was quite complex as it was in a paragraph format. Now in the new Income Tax Bill, an effort has been made to tabulate certain parts of the wordings, to make the meaning of “agricultural land” easier to comprehend,” said CA (Dr.) Suresh Surana,
Section 10 of the Income Tax Act, which previously outlined exemptions for various types of income, including agricultural income, partnership firm profits, family pensions, scholarships, interest on NRE / FCNR deposits, and short-stay exemptions, is now presented in a tabular format in Schedule II to Schedule VII of the Income Tax Bill.
This new format in the Income Tax Bill simplifies the process for individuals to determine whether their specific income is exempt or not, aligning with the objective of making the ITA more user-friendly and easily understandable for the general public.
Key highlights for agricultural income
Cultivation of Land: Tax exemption remains, but now requires stricter documentation to verify farming activities.
Rent or Revenue from Agricultural Land: Income from leasing agricultural land in urban areas is now subject to taxation.
Processing of Agricultural Produce: Value-adding processes beyond marketability requirements are now taxable.
Income from Nursery Operations: Traditional nursery activities are exempt, while commercial nurseries are now taxed.
Income from Dairy Farming: Dairy, poultry, and fisheries income are now fully taxable, not considered agricultural income.
Agro-Based Industries: Tax incentives have been reduced, with small-scale agro-industries retaining benefits while large agribusinesses face higher taxes.
What does the Bill say:
As per Income Tax Bill 2025, “agricultural income” means—
(a) any rent or revenue derived from a land which is situated in India and is used for agricultural purposes;
(b) any income derived from such land by—
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in item;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind of any such land with respect to which, or the produce of which, any process mentioned in sub-clause(b) (ii) or (b)(iii) is carried on, where such building––
(i) is on or in the immediate vicinity of such land and that land is assessed to land revenue in India, or is subject to a local rate assessed and collected by officers of the Government as such, or where the land is not so assessed to land revenue or subject to a local rate, it is not situated in any area as specified in clause (22)(iii)(A) or (B);and
(ii) is required as a dwelling house, or as a store-house, or other out-building, by the receiver of the rent or revenue or the
cultivator, or the receiver of rent-in-kind, by reason of his connection with the land;
(d) any income derived from saplings or seedlings grown in a nursery,
What is not agricultural income
(i) Income generated from the utilisation of any building or land mentioned in sub-clause (c) for any purpose, such as residential rental or for conducting business activities, excluding agricultural use as specified in sub-clauses (a) or (b); or
(ii) Any income derived from the sale of any land described in clause (22)(iii)(A) or (B).