Consider the following statements: Statement I: In India, income from allied agricultural activities like

Q. Consider the following statements:

UPSC Civil Services Examination (Prelims) 2025 – General Studies Paper I

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

Answer: (d) Statement I is not correct but Statement II is correct

Explanation:

Statement I is incorrect. Income from certain allied agricultural activities in rural areas may be treated as agricultural income and thus exempt under specific conditions but not in all conditions.

Statement II is correct: As per Section 2(14) of the Income Tax Act, rural agricultural land is excluded from the definition of ‘capital asset’, meaning capital gains do not apply to its sale.
However, Statement II does not explain I, the exemption for allied activities is not due to the capital asset treatment of land.