<p>This article examines the sources of income among agriculture households across Indian states, analyzing the contribution of each source to overall income and income inequality. Using data from the NSS 77th Round survey on the Situation Assessment of Agriculture Households, Gini decomposition by income source has been conducted to assess the distribution of income. The analysis reveals that farming and wages are the two most important sources of income for agriculture households, with farming being the largest source in some states and wages in others. Together, they account for more than 80% of the total income of agriculture households across the states. Although inequality in farm income and total income is notably high across all states, total income inequality is consistently lower than farm income inequality. This suggests that agriculture households with lower farm incomes benefit relatively more from non-farm income sources. The decomposition of income inequality by source shows that farming and wages are the two largest contributors to inequality, although their effects vary across states. In some states, farming contributes most to inequality, while in others, wages are the primary driver. Moreover, the marginal effects of farming and wages on inequality differ by state: in a few states, farming reduces inequality, while in others, it exacerbates it—similar patterns are observed with wages. The article argues for the importance of state-specific policies to address these inequalities and emphasizes the need for targeted approaches in states where farming or wages are the predominant sources of income or major contributors to inequality.</p>