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History In 1860 the British rulers levied income tax in India. Agricultural Income was also taxable. In 1882 Agricultural Income was exempted from taxation. After partition In 1970 it was tried to impose but was not accepted. In 1977 the Assembly passed the Financial Ordinance, which exempted 25 Acres irrigated and 50 Acres non irrigated land from taxation. Due to the imposition of Martial Law, it could not be implemented and today it is still exempted. Agricultural Income: ACCORDING TO INCOME TAX ORDINANCE 2001UNDER SECTION 41 OF PAKISTAN IT DERIVES THAT INCOME EARNED FOR AGRICULTURE BY A PERSON SHALL BE EXEMPT. Agricultural income means an Income, which satisfies the following conditions: A) The income is derived from the land. The income maybe in the form of rent or revenue. B) The land from where the income is derived is situated in Pakistan; and C) The land is used for agricultural purpose. Sources of Agricultural Income: Agricultural income may be derived from any of the following ways: 1) Rent or revenue from the land used for agricultural purposes. 2) Income from agriculture. 3) Income of the cultivator (farmer) or receiver (beneficiary) of rent-in-kind from the sale of agricultural product without performing any further processes. (The cultivator may get rent in the form of cash or maybe instead of giving cash receiver sells a product to farmer). Explanation: Having performed the process to make the product fit to be taken to market so any income rises from that process is exempt. 4) Income from the performance of any process, by the cultivator or receiver of rent-in-kind, generally employed to render the product fit to be taken to market. Explanation: sometimes you give or take product in place of product in the shape of rentin-kind. 5) Income from building shall also be agricultural income, if the following conditions are satisfied: i. The building is owned and occupied by the cultivator or receiver of rent-in-kind.

ii. iii.

The building is situated in the immediate vicinity of the land used for agricultural purposes. The building is required by the cultivator or the receiver of rent-in-kind, due to his connection with the agricultural land like store house etc.


Agricultural Income is exempt from tax under Section 10(1) of the Income Tax Act. What does the term Agricultural Income mean? As per Income Tax Act income earned from any of the under given three sources meant Agricultural Income; (i) Any rent received from land which is used for agricultural purpose.

(ii) Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind to make it fit for the market. (iii) The building is situated in the immediate vicinity of the land used for agricultural purposes. In order to consider an income as agricultural income certain points have to be kept in mind: (i) There must me a land. (ii) The land is being used for agricultural operations. (iii) If any rent is being received from the land that is exempt too if agricultural activities occur in that land.


Vehicles used only for the purpose of agriculture, horticulture and forestry are exempt agriculture income.

Article 141 of the Direct Taxation Act: 100% of the income earned the products of the agricultural sector (including farm and orchard produces, livestock and poultry, fishery products, forest and pasture products) Article 88 of the Direct Taxation Act: The income derived from all activities in the field of agriculture; animal rearing; stockbreeding; fish farming; bee-keeping; poultry husbandry; hunting and fishing; sericulture; revival of pastures and forests, horticulture of any type and palm trees, is exempt from payment of taxes. You may claim this exemption if the property is unoccupied and unfurnished and is situated on lands and heritages used for agricultural or pastoral purposes only, or as woodlands, market gardens, orchards, allotments or allotment gardens, fish farms or forestry, or, on lands exceeding one tenth of an hectare used for the purpose of poultry farming To get exemption you have to fill Agricultural Exemption Claim Form.

Following are some of the examples of agricultural income: - Income from land used for crops. - Income from land used for growing tea, fruits, or flowers. - Income from fruit nurseries. - Incomes from cultivated forest. Following are some of the examples of non-agricultural income: - Fee charged for cutting down wood. - Profit on sale of wood by a middleman who bought it from the cultivator. - Income of sugar, tea, rice factories. - Income from sale of water for irrigation. - Income from dairy-farming, and poultry farming.