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UPSC 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, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961. Which one of the following is correct in respect of the above statements?
(a)Both Statement I and Statement II are correct and Statement II explains Statement I
(b)Both Statement I and Statement II are correct but Statement II does not explain Statement I
(c)Statement I is correct but Statement II is not correct
(d)Statement I is not correct but Statement II is correct
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Not attemptedCorrect Answer: (d) Statement I is not correct but Statement II is correct
Income from allied activities such as poultry-, dairy-, wool- or livestock-rearing is treated as business income because it does not involve cultivation of land; hence it is taxable and Statement I is wrong. Rural agricultural land is specifically excluded from the definition of “capital asset” under section 2(14)(iii) of the Income-tax Act, 1961, so gains on its transfer are not subject to capital-gains tax; therefore Statement II is correct. ([bcom.institute](https://bcom.institute/income-tax-law-and-practice/understanding-agricultural-income-indian-tax-law/?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2025 Indian Economy question?▼
The correct answer is option (d): Statement I is not correct but Statement II is correct. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Taxation question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2025, GS Paper 1, as Question 5. It falls under Indian Economy > Taxation.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from Taxation?▼
UPSC has asked 19 questions from Taxation (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.