UPSC Previous Year Question | Prelims GS | 2025

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, under the provisions of the Income-tax Act, 1961, rural agricultural land is not considered a capital asset. Which one of the following is correct in respect of the above statements?

  1. Both Statement I and Statement II are correct and Statement II explains Statement I
  2. Both Statement I and Statement II are correct but Statement II does not explain Statement I
  3. Statement I is correct but Statement II is not correct
  4. Statement I is not correct but Statement II is correct

Answer

Correct Answer

Statement I is not correct but Statement II is correct

Explanation

Income from allied activities such as poultry-farming and wool rearing is not treated as agricultural income and is therefore taxable, making Statement I incorrect. Rural agricultural land is excluded from the definition of 'capital asset' under Section 2(14) of the Income-tax Act, 1961, making Statement II correct.

Topics: agriculture, economy, income tax