Agriculture income is exempt in India1 but taxable in the UK. Thus, an individual tax resident in the UK having agriculture income from India will need to pay tax on it in the UK.
Agriculture income can be of two types – trading income or rental income.
Trading income
Whether it is a trade or not will be decided using the usual principles of `badges of trade`.2 Agriculture income is generally calculated in the same way as other businesses3. Deduction of expense is allowable. BIM55095 is misleading, please read BIM37625 for more details on the case – Sargent v Eayrs [1972] 48TC573.
Taxes payable – Both Income tax and NIC.
Rental Income
Farm lands rented out – rent could be an agreed minimum rent or rent based on the value of produce. In both cases taxed as rental income.4
Taxes payable – Income tax only.
Taxable income
The amount of income taxable on the landowner will often be much the same whether he or she is treated as a farmer taxable as a trader or as a landlord in respect of property income. The main advantage of farming treatment for the landowner lies in the reliefs from Capital Gains Tax and Inheritance Tax which are available to farmers but not to landlords. See BIM55085
Notes
- Indian Income Tax Text – read section 2 (1A) and section 10 (1)
- BIM55095
- 31.1 Tolley Tax guide.
- 31.13 Tolley Tax guide.
Source
- BIM55050 et seq.
Further reading
To know more about taxation of foreign income in the UK read our Worldwide Disclosure blog.
Roy Accountants 