Read the statements: 1. Agricultural income is exempt from tax under Section 10(1) of Income Tax Act, 1961. 2. Non-agricultural income above exemption + agricultural income above 5000 is taxable via partial integration.
Explanation & Strategy
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Both statements are accurate. Statement 1 correctly identifies Section 10(1) as exempting agricultural income. Statement 2 describes the partial integration mechanism — when a person has both types of income and the non-agricultural income exceeds the exemption limit while agricultural income exceeds Rs. 5,000, the agricultural income is notionally added to compute the tax rate, then tax on agricultural income alone is subtracted. This ensures that people with high agricultural income don't get a lower tax rate on their non-agricultural income.
The text reads: Section 10(1) IT Act: Agricultural income is exempt from tax.