Agricultural Income in ITR for AY 2026-27: Partial Integration, Schedule EI and ₹5 Lakh Land Details

Agricultural income and income tax returns: the basic rule

Qualifying agricultural income from land situated in India is generally exempt from central income tax under section 10(1) of the Income-tax Act, 1961. Exempt does not always mean “leave it off the return.” You may need to report it in Schedule EI, and it can affect the tax rate applied to your other income through a method called partial integration.

AY 2026-27 covers income earned during FY 2025-26, from 1 April 2025 to 31 March 2026. Use the AY 2026-27 ITR forms and the Income-tax Act, 1961 rules for this return. Do not confuse it with Tax Year 2026-27, which concerns income earned from 1 April 2026 under the new Income-tax Act framework.

The ₹5 lakh figure relates to land details required in Schedule EI when net agricultural income exceeds ₹5 lakh. It is separate from the ₹5,000 agricultural-income limit used in certain ITR form eligibility rules and the ₹5,000 threshold for partial integration.

What counts as agricultural income?

In general, agricultural income must relate to land situated in India and used for agricultural purposes. It can include:

• Rent or revenue from agricultural land.
• Income from cultivating land and selling the produce raised by the cultivator.
• Income from processes ordinarily used by a cultivator to make produce fit for sale, such as cleaning, grading or drying, where the process is customary and limited to preparing the produce for market.
• Income from a qualifying farm building, subject to statutory conditions.
• Income from a nursery, which is treated as agricultural income under the Act.

The treatment depends on the activity and facts. Owning farmland by itself does not make every receipt agricultural income. A payment for allowing someone to use land for a non-agricultural activity, for example, may have a different tax treatment.

Some farm-connected receipts are not automatically agricultural income. Dairy, poultry, fisheries, livestock, food processing and trading in produce purchased from others may be taxable under other income heads. If an activity combines farming with manufacturing or processing beyond ordinary market preparation, special rules may apply.

Tea, coffee and rubber businesses can have income split between agricultural and business components under specific rules. Do not report the entire receipt as exempt agricultural income without checking the applicable computation.

Schedule EI: what to report for AY 2026-27

Schedule EI is used to report exempt income. In the AY 2026-27 return forms, the agricultural-income section asks for gross agricultural receipts, agricultural expenditure, eligible unabsorbed agricultural losses from the previous eight assessment years, and net agricultural income for the year.

Net agricultural income is broadly calculated as:

Gross agricultural receipts − agricultural expenditure − eligible unabsorbed agricultural loss

If the result is a loss, enter nil as net agricultural income in the relevant field, as instructed by the form. Do not use a current-year agricultural loss to reduce salary, interest, capital gains or other non-agricultural income.

If net agricultural income for the year exceeds ₹5 lakh, Schedule EI asks for details separately for each agricultural land. These include:

• District and PIN code where the land is located.
• Area of the land in acres.
• Whether the land is owned or held on lease.
• Whether it is irrigated or rain-fed.

The ₹5 lakh threshold concerns these land particulars. It does not mean agricultural income above ₹5 lakh becomes taxable, nor does it replace the separate ₹5,000 rules discussed below.

Partial integration: when exempt income affects your tax rate

Partial integration is a method of calculating tax on non-agricultural income. It does not make agricultural income directly taxable as an ordinary receipt. Instead, it can increase the rate used to calculate tax on your other income.

For an individual, partial integration generally applies when both conditions are met:

1. Net agricultural income is more than ₹5,000; and
2. Non-agricultural income exceeds the basic exemption limit applicable to the taxpayer and chosen tax regime.

The calculation is broadly:

1. Calculate tax on non-agricultural income plus net agricultural income.
2. Calculate tax on net agricultural income plus the applicable basic exemption limit.
3. Subtract the second amount from the first.
4. Apply any relevant rebate, surcharge and cess according to the law and return instructions.

The basic exemption limit varies by tax regime and taxpayer category. For AY 2026-27, the new regime’s basic exemption is ₹4 lakh. Under the old regime, it is generally ₹2.5 lakh for an individual below 60, with different limits for eligible resident senior citizens. Use the limit that applies to your circumstances.

Example: individual below 60 using the old regime

Assume a taxpayer has:

• Non-agricultural taxable income: ₹8,00,000
• Net agricultural income: ₹2,00,000
• Old-regime basic exemption limit: ₹2,50,000

Tax is first calculated on ₹10,00,000, combining the two income amounts. Tax on ₹4,50,000, which is agricultural income plus the basic exemption limit, is then subtracted. Under the old-regime slab rates for an individual below 60, the resulting tax is ₹1,02,500 before cess.

This illustrates the method, not a final tax computation. Rebate eligibility, special-rate income, deductions, surcharge, cess, regime choice and other facts can change the final amount.

Do not mix up the ₹5,000 and ₹5 lakh thresholds

For example, a taxpayer with net agricultural income of ₹4 lakh may need to consider partial integration even though the Schedule EI land-detail threshold is not crossed. Income above ₹5 lakh does not automatically make qualifying agricultural income taxable.

Which ITR form should you use?

Agricultural income is only one part of ITR form selection. Consider all income sources, residential status, total income, losses, assets and other eligibility conditions.

• ITR-1: A resident individual who meets all other conditions may use ITR-1 if agricultural income is up to ₹5,000.
• ITR-2: Generally applies to individuals and HUFs without business or professional income. Agricultural income exceeding ₹5,000 is listed as a reason to use ITR-2, subject to the other form rules.
• ITR-3: May apply when the taxpayer has business or professional income, including where agricultural activity is connected with a business computation.
• ITR-4: Eligible taxpayers using presumptive taxation may use ITR-4 only if they meet its other conditions; agricultural income must be up to ₹5,000.

These are starting points, not a complete eligibility test. For a fuller form comparison, see TaxClear’s guide to choosing the correct ITR form for AY 2026-27.

How to report agricultural income in practice

Before filing, prepare a year-wise working of farm receipts and costs. Then:

1. Classify each receipt. Identify whether it comes from cultivation, rent, sale of produce, processing, a farm building or another activity.
2. Separate agricultural and non-agricultural amounts. Check whether a special allocation rule applies where an activity has both components.
3. Calculate net agricultural income. Deduct eligible expenses attributable to agricultural operations and account for eligible brought-forward agricultural losses as required by the form.
4. Complete Schedule EI. Enter gross receipts, expenses, prior agricultural loss and net income in the appropriate fields.
5. Provide land particulars if required. If net agricultural income exceeds ₹5 lakh, give details for each agricultural land in the format requested.
6. Check partial integration. Compare net agricultural income with ₹5,000 and non-agricultural income with the basic exemption limit applicable to your regime and taxpayer category.
7. Select the correct ITR. Check the current AY 2026-27 form instructions and all eligibility conditions.
8. Reconcile your return. Ensure the exempt-income reporting agrees with your working papers and supporting records.

The filing due date depends on your taxpayer category and return type. CBDT Circular No. 07/2026 extended certain AY 2026-27 deadlines. Check the Income Tax Department’s current due-date schedule for your category. A deadline applicable to an audit case may not apply to someone filing ITR-1 or ITR-2. For related filing steps and common return errors, see TaxClear’s AY 2026-27 ITR filing guide.

Records to keep

Keep records that show both the source and computation of agricultural income. Depending on the activity, useful documents include:

• Ownership documents, lease deed or other evidence of the right to cultivate.
• Land location, area, crop and season records.
• Bills for seeds, fertiliser, labour, irrigation, equipment, transport and other farm costs.
• Sale invoices, mandi receipts, weighment slips or commission-agent statements.
• Bank statements showing sale proceeds and payments.
• Records of crop insurance, compensation or subsidies, with the nature of each receipt identified.
• Prior-year returns and workings supporting any unabsorbed agricultural loss claimed.

Where land is leased or cultivated under a sharing arrangement, retain the agreement and evidence showing how crop proceeds and costs were divided.

Common mistakes to avoid

• Treating every farm-related receipt as exempt. Classification depends on the source and activity.
• Omitting agricultural income because it is exempt. Schedule EI may still require disclosure, and agricultural income can affect the rate on other income.
• Confusing ₹5,000 with ₹5 lakh. One figure affects partial integration and certain ITR form eligibility; the other triggers land particulars in Schedule EI.
• Claiming agricultural losses against salary or other income. Agricultural loss is not a general deduction against non-agricultural income.
• Ignoring prior-year loss records. Schedule EI asks for eligible unabsorbed agricultural losses from the previous eight assessment years. Keep the year-wise computation and check that the loss remains available under the applicable rules.
• Choosing a return form based only on farm income. Business income, residency, capital gains and other conditions can change the required form.
• Reporting only net income without the requested breakup. Complete each Schedule EI field and land detail that applies.

Frequently asked questions

Is agricultural income taxable in India for AY 2026-27?

Qualifying agricultural income from land in India is generally exempt from central income tax under section 10(1). It may still need to be reported and can affect the tax rate on other income through partial integration.

Do I need to report agricultural income below ₹5,000?

Report exempt income as required by the applicable return form. Agricultural income up to ₹5,000 may be permitted in ITR-1 or ITR-4 if all other conditions are met. Check the form instructions for where to disclose it.

Does agricultural income above ₹5 lakh become taxable?

No. The ₹5 lakh Schedule EI threshold calls for land particulars for each agricultural land. It does not, by itself, make qualifying agricultural income taxable.

When does partial integration apply?

For an individual, it generally applies when net agricultural income exceeds ₹5,000 and non-agricultural income is above the basic exemption limit applicable to the taxpayer and tax regime.

Can I set off agricultural loss against salary?

No. Do not set off agricultural loss against salary or other non-agricultural income. Schedule EI asks for eligible unabsorbed agricultural losses from the previous eight assessment years to be considered in calculating net agricultural income.

Which ITR should I file if agricultural income exceeds ₹5,000?

ITR-1 and ITR-4 are generally unavailable when agricultural income exceeds ₹5,000. ITR-2 may apply if you do not have business or professional income; ITR-3 may apply if you do. Check the AY 2026-27 form eligibility rules for your full circumstances.