Question 55
Set 4
Contents
QQuestion
OOptions
✓Correct Answer
DDalvoy Solutions
Statement I: Incorrect. Income from allied agricultural activities like poultry farming and wool rearing in rural areas is NOT completely exempt from tax. While agricultural income from land is exempt under Section 10(1), allied activities like poultry and dairy farming may be subject to taxation depending on the scale and nature of operations.
Statement II: Correct. Under the Income Tax Act, 1961, rural agricultural land is indeed not considered a capital asset, and therefore gains from its sale are not subject to capital gains tax. This exemption applies specifically to agricultural land in rural areas.
The exemption for agricultural land reflects the policy to support agricultural activities, but allied agricultural activities may have different tax treatment based on their commercial nature.
SUPSC Prelims Strategy and Tips
For tax law questions, distinguish between different types of agricultural activities and their tax treatment. Pure agricultural income from land has different treatment than commercial agricultural activities.