Income Tax

Running a Dairy or Poultry Farm? Why This Income Is Not 'Agricultural Income' for Tax Purposes

CA Nikhil Gupta·June 2026·5 min readIncome Tax

Agricultural income enjoys a favourable position under income tax law, broadly exempt from tax. It is a common assumption that any income connected with farming, land, or rural activity falls under this umbrella. However, income from dairy farming, poultry, and similar livestock-rearing activities is treated quite differently, and understanding why matters for anyone running, or planning to start, such a business.

Agricultural Income Requires Income From Land, Through Agricultural Operations

The defining test: For income to qualify as agricultural income (and thereby be exempt from income tax), it must generally arise from land that is used for agricultural purposes, through operations like cultivation, sowing, tilling, and similar processes connected with growing produce from that land. Income from rearing livestock, cattle, poultry, or similar animals does not arise from agricultural operations on land in this sense, even if the animals are kept on agricultural land or fed using produce grown on it.

Dairy and Poultry Income Is Business Income

Income from a dairy business (selling milk and milk products from a herd of cattle or buffaloes), a poultry farm (selling eggs and/or poultry meat), or similar livestock-based activities (such as goat or sheep rearing, fish farming/aquaculture) is taxed as income from business, computed in the normal way, gross receipts from sale of milk, eggs, livestock, etc., less the expenses of running the operation (feed costs, veterinary expenses, labour, depreciation on sheds and equipment, and so on), with the resulting profit taxed at the applicable rate for the type of taxpayer (individual slab rates, or corporate rates if run through a company).

Worked Example

What If the Farmer Also Grows Crops on the Same Land?

Many dairy or poultry operations are run alongside crop cultivation on the same agricultural landholding. In such cases, income from the crop cultivation portion (genuine agricultural operations on the land) would be evaluated separately under the agricultural income exemption, while the dairy/poultry income remains business income, taxed in the normal way. Maintaining separate records for the agricultural (crop) activity and the livestock activity becomes important to correctly apply the different tax treatments to each.

Income From Sale of Manure or By-Products

Where manure or other by-products of livestock rearing are used as fertiliser for the farmer's own agricultural crops (supporting the agricultural operations), this is generally an internal input to the farming activity rather than a separate income stream. Where such by-products are sold separately as a distinct revenue stream, that sale would generally also be evaluated as business income, similar to the livestock income itself.

GST and Other Compliance for Livestock Businesses

Beyond income tax, a dairy or poultry business of meaningful scale would also need to consider GST registration and compliance (noting that certain unprocessed agricultural and dairy products may have specific GST treatments), as well as any sector-specific regulatory registrations applicable to livestock and food businesses.

🐄

Running a dairy, poultry or livestock business?This income is taxed as business income, not exempt agricultural income.

Explore Tax Tools

Frequently Asked Questions

Is income from beekeeping or sericulture (silk farming) also treated as business income, like dairy and poultry? ▼

Similar reasoning would generally apply: where the income arises from rearing or breeding activity (bees, silkworms) rather than from agricultural operations on land (cultivation of crops), it would generally be evaluated as business income rather than as exempt agricultural income, following the same underlying principle that distinguishes livestock/rearing-based income from land-based agricultural operations.

If I lease out my agricultural land to someone else who runs a dairy farm on it, is my rental income agricultural income? ▼

Rental or lease income received by a landowner from leasing out land would need to be evaluated on its own terms; income from leasing land for a non-agricultural use (such as a dairy operation that is not itself an agricultural operation on the land) would not automatically qualify as exempt agricultural income merely because the land itself is agricultural land, and the landowner's rental receipt would generally need separate evaluation.

Can a dairy or poultry business use presumptive taxation under Section 44AD? ▼

Section 44AD's presumptive scheme is available to eligible businesses meeting its turnover and other conditions, generally without restriction to specific industries (subject to certain exclusions specified in the provision). A dairy or poultry business that meets the eligibility conditions of Section 44AD could potentially consider this presumptive scheme as an alternative to computing actual profits, similar to other small businesses.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: Income Tax
Official starting point: www.incometax.gov.in
Editorial review date: 2026-07-19
Content status: Finin2min explanation; official source controls where facts, law, rates, forms or procedures can change.

Page source links

The prior page did not embed a page-specific external source. The category authority above is the minimum verification starting point; a specific instrument should be added during the next substantive editorial review.