# Partial Integration of Agricultural Income with Non-Agricultural Income
## Concept
Agricultural income by itself is exempt under section 10(1). But to ensure that high-income assessees do not enjoy a lower marginal rate on their non-agricultural income simply because of large agricultural income, the law uses an indirect method to consider agricultural income — called the Partial Integration Method.
It does NOT tax agricultural income. It only uses agricultural income to push the non-agricultural income into a higher slab.
## Applicability
### Applicable to:
- Individual
- HUF
- AOP / BOI (Association of Persons / Body of Individuals)
- Artificial Juridical Person
### NOT Applicable to:
- Company
- Firm / LLP
- Co-operative Society
- Local Authority
(Reason: these entities are taxed at flat rates, so changing the slab does not impact them.)
## Conditions (Both Must Be Satisfied)
Partial integration applies only if:
1. Net agricultural income > ₹5,000 for the previous year, AND
2. Non-agricultural income > Basic Exemption Limit applicable to the assessee.
If either condition fails → no partial integration; tax computed normally on non-agricultural income only.
## Steps of Partial Integration
Step 1: Compute tax on (Non-agricultural income + Net agricultural income) at slab rates.
Step 2: Compute tax on (Net agricultural income + Basic Exemption Limit) at slab rates.
Step 3: Tax payable on Non-Agricultural Income = Step 1 − Step 2
Step 4: Add surcharge (if applicable) and Health & Education cess @4%.
Step 5: Apply rebate u/s 87A if eligible.
## Why It Works
The Step-2 subtraction effectively grants the basic exemption against agricultural income, leaving only the non-agricultural income to bear tax at the higher marginal rates.