Agriculture & Agri-Processing Company Audit Checklist

Test the Sec 10(1) agricultural-income exemption boundary, Ind AS 41 biological asset / produce valuation, and mandi/APMC compliance for a company engaged in agriculture or agri-processing.

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Updated 28 Jul 2026

Exemption test

Sec 10(1) — basic agricultural operations on Indian land

Biological assets

Ind AS 41 — fair value less costs to sell

Regulatory

APMC mandi cess, Essential Commodities Act

Format

Microsoft Word (.docx)

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Agriculture & Agri-Processing Company Audit Checklist

31 July 2026

AGRICULTURE & AGRI-PROCESSING COMPANY AUDIT CHECKLIST

Entity: {{client_name}} · Year ended: {{period_end}}

Purpose: test the boundary between exempt agricultural income (Sec 10(1), Income-tax Act 1961) and taxable agri-processing/trading income, and the accounting treatment of biological assets and agricultural produce.

A. Sec 10(1) agricultural income exemption boundary

Test	Result / Observation
Income arises from land situated in India and used for agricultural purposes
Basic agricultural operations (tilling, sowing, cultivation) were performed on the land, not merely processing of purchased produce
Where produce is processed before sale, only the processing ordinarily employed by a cultivator to make the produce marketable is treated as agricultural — further processing (e.g. manufacturing branded food products) generates business income, not exempt income
Income has been correctly apportioned between exempt agricultural income and taxable business income where the entity both grows and processes/manufactures (e.g. Rule 7/7A/7B-type composite income scenarios for tea, rubber, coffee)
Agricultural income has been correctly included for rate-purposes aggregation in the case of individuals/HUFs (partial integration), where applicable

B. Biological assets and agricultural produce (Ind AS 41 / AS, where applicable)

Test	Result / Observation
Biological assets (livestock, standing crops, plantations) are measured at fair value less costs to sell where Ind AS 41 applies, with fair value gains/losses routed through profit or loss
Agricultural produce harvested from biological assets is measured at fair value less costs to sell at the point of harvest, which then becomes its deemed cost for subsequent inventory accounting
Where fair value cannot be measured reliably (rare, typically only at initial recognition), cost less accumulated depreciation and impairment is used instead, with disclosure of why fair value was not used
Land and bearer plants (e.g. mature orchards, plantations) are distinguished from the biological assets they bear — bearer plants are accounted for as PPE under Ind AS 16, not as biological assets

C. Mandi / APMC and other regulatory compliance

Test	Result / Observation
APMC (Agricultural Produce Market Committee) mandi cess/fees on produce bought or sold through regulated markets have been correctly accounted for and are not omitted from cost/revenue
Where the entity procures directly from farmers outside the mandi system (post-APMC-reform states), the applicable state amendment permitting this is on file
Essential Commodities Act stock-limit compliance has been checked for commodities where limits apply
GST treatment of unprocessed vs. processed agricultural produce has been correctly applied (many unprocessed agricultural products are exempt; processing/branding typically brings the output into a taxable GST rate)

D. Conclusion

Conclusion on the agricultural-income exemption boundary and biological-asset accounting: ____________________________________________

Prepared by	Reviewed by	Engagement partner

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What’s inside

An excerpt from the template.

AGRICULTURE & AGRI-PROCESSING COMPANY AUDIT CHECKLIST

Entity: ___ · Year ended: ___

A. Sec 10(1) agricultural income exemption boundary

↑ Excerpt only — the full template is what you download as Word

About this template

What you’re downloading, and when to use it.

This template follows the format published by the Institute of Chartered Accountants of India (ICAI) in the AASB Audit Working Paper Templates (June 2023), the authoritative reference for Indian statutory-audit documentation. Fill in your firm’s letterhead and the engagement details on the form above, click Download Word file, and you’ll get a fully formatted .docx ready to use.

Everything is generated in your browser and on a stateless API endpoint — no account, nothing stored on our servers. We’ll ask for a work email once before your first download so we can send you the file and the occasional relevant update; after that, downloads on this device are instant. Edit freely in Word, Google Docs or Pages before sending to your client.

Common questions

FAQs.

When does agri-processing income stop being exempt agricultural income?

Sec 10(1) exempts income from basic agricultural operations and the minimal processing a cultivator ordinarily performs to make produce marketable (e.g. drying, cleaning, grading). Once the entity goes beyond that — manufacturing branded packaged food, extensive mechanical processing, or processing produce it did not itself grow — the resulting income becomes taxable business income, not exempt agricultural income. The test is applied operation-by-operation, not to the whole enterprise at once.

How are biological assets valued under Ind AS 41?

Biological assets (standing crops, livestock, plantations) are measured at fair value less costs to sell at each reporting date, with the change in fair value recognised in profit or loss. Harvested agricultural produce is measured at fair value less costs to sell at the point of harvest, and that harvest-date fair value becomes its cost for all subsequent inventory accounting under Ind AS 2.

Does mandi/APMC cess apply if produce is bought directly from farmers?

It depends on the state — several states amended their APMC Acts to permit direct purchase from farmers outside regulated mandi yards, exempting such purchases from mandi cess, while others still require routing through APMC markets for certain commodities. Verify the specific state's current APMC amendment status rather than assuming either outcome uniformly.

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