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?
Show answer
Answer: D. Statement I is wrong: under the Income-tax Act, agricultural income means income from land used for agriculture. Poultry farming and wool rearing are not done on land in this sense, so their income is taxable. Statement II is correct: Section 2(14) of the Income-tax Act excludes rural agricultural land from the meaning of 'capital asset'. So I is wrong and II is correct.
Watch for: 'Allied agricultural activities' sound like agriculture, but the tax exemption is only for land-based agricultural income.
Why the other options are wrong
- A. Wrong because Statement I is incorrect.
- B. Wrong because Statement I is incorrect.
- C. Wrong because Statement I is incorrect and Statement II is correct.
Source to check: Income-tax Act, 1961: Section 2(1A) (agricultural income), Section 2(14) (capital asset), Section 10(1)
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.