Tea, Coffee and Rubber Development Account Deduction 2026-27 (Income Tax Act 2025, Section 48)
Under section 48 of the Income Tax Act, 2025, a person who grows and manufactures tea, coffee or rubber in India can claim a business deduction for money deposited in a Tea, Coffee or Rubber Board development account. The deduction is the lower of the amount deposited and 40% of the business profit before this deduction. The detailed rules sit in Schedule IX, and the audit report goes in Form No. 182 (rule 290 of the Income-tax Rules, 2026).
The deduction is not free money. Amounts later withdrawn and not used for the approved purpose, or spent on certain assets, come back into taxable business profit. This guide explains who qualifies, how to compute the deduction, the deposit and audit deadlines, and what triggers tax on withdrawal. Figures are from the Act as amended by the Finance Act, 2026, for tax year 2026-27 (1 April 2026 to 31 March 2027).
Who can claim the tea, coffee or rubber development account deduction?
Section 48(1) and Schedule IX paragraph 2(1)(a) require that the assessee is carrying on the business of growing and manufacturing tea, coffee or rubber in India during the tax year. The assessee can be an individual, HUF, company, firm, AOP or BOI. If the assessee is a firm, AOP or BOI, the deduction is not allowed again in the hands of the partners or members (Schedule IX, paragraph 2(4)).
What are the specified accounts?
A deposit counts only if it goes into a "specified account" (Schedule IX, paragraph 6):
- Special account: an account with the National Bank (NABARD) used under the special scheme, which is a scheme approved by the Tea Board, Coffee Board or Rubber Board.
- Deposit account: an account used under the deposit scheme, a scheme made by the Tea Board, Coffee Board or Rubber Board with the prior approval of the Central Government.
What the money may be spent on is set by those schemes, not by the Act. The schemes themselves are not reproduced in the Act text, so check the current scheme of the relevant Board before you plan a withdrawal.
How much deduction can you claim?
Under Schedule IX, paragraph 1(1), the deduction is whichever is less of:
- the amount (or total of amounts) deposited in the specified account, or
- 40% of the profits of the business computed under "Profits and gains of business or profession" before making this deduction.
Paragraph 1(2) says the deduction is allowed before set-off of brought-forward losses under section 112. So the 40% is applied to current-year business profit, not profit after old losses are set off.
Worked example 1: deposit is lower than the 40% cap
Assumptions: tax year 2026-27, a tea grower and manufacturer, business profit before this deduction of Rs 50,00,000, deposits of Rs 15,00,000 in the special account.
| Step | Working | Amount (Rs) |
|---|---|---|
| 1. Business profit before deduction | Given | 50,00,000 |
| 2. 40% of profit | 50,00,000 x 40% | 20,00,000 |
| 3. Amount deposited | Given | 15,00,000 |
| 4. Deduction = lower of step 2 and 3 | Lower of 20,00,000 and 15,00,000 | 15,00,000 |
| 5. Business profit after deduction | 50,00,000 - 15,00,000 | 35,00,000 |
Worked example 2: deposit is higher than the 40% cap
Assumptions: tax year 2026-27, a rubber grower and manufacturer, business profit before this deduction of Rs 30,00,000, deposits of Rs 18,00,000 in a deposit account.
| Step | Working | Amount (Rs) |
|---|---|---|
| 1. Business profit before deduction | Given | 30,00,000 |
| 2. 40% of profit | 30,00,000 x 40% | 12,00,000 |
| 3. Amount deposited | Given | 18,00,000 |
| 4. Deduction = lower of step 2 and 3 | Lower of 12,00,000 and 18,00,000 | 12,00,000 |
| 5. Business profit after deduction | 30,00,000 - 12,00,000 | 18,00,000 |
Here Rs 6,00,000 of the deposit gets no deduction in this year. Paragraph 2(3) adds that an amount for which a deduction has been allowed in one tax year cannot be claimed again in another year.
What conditions must be met, and by when?
| Condition | What the Act says | Reference |
|---|---|---|
| Business | Growing and manufacturing tea, coffee or rubber in India during the tax year | Sch. IX, para 2(1)(a) |
| Deposit deadline | Deposit in the special or deposit account before the earlier of: six months from the end of the tax year, or the due date for furnishing the return | Sch. IX, para 2(1)(b) |
| Audit | Accounts of the business audited by an accountant before the "specified date" in section 63, and the audit report furnished by that date | Sch. IX, para 2(1)(c) |
| Audit report form | Form No. 182 | Rule 290 |
| Specified date | One month before the due date for furnishing the return under section 263(1) | Section 63(5)(a) |
For tax year 2026-27, six months from 31 March 2027 is 30 September 2027. If the return due date is earlier than that for the assessee, the earlier date applies. If the assessee must get accounts audited under another law, paragraph 2(2) lets that audit satisfy the requirement, but the assessee still has to furnish the audit report and an accountant's report in the Form 182 format by the specified date.
What happens when you withdraw money from the account?
Money in the specified account cannot be withdrawn except for the purpose in the scheme, or in the cases listed in paragraph 3(1): closure of business, death of the assessee, partition of a HUF, dissolution of a firm, or liquidation of a company. Section 48(2) and paragraph 3 then decide whether a withdrawal is taxed.
Specified articles that trigger tax
Paragraph 3(6) lists the "specified article or thing" for the rule in paragraph 3(3):
- machinery or plant installed in office premises or residential accommodation, including a guest-house;
- office appliances, other than computers;
- machinery or plant whose whole actual cost is allowed as a deduction (by depreciation or otherwise) in one tax year;
- new machinery or plant for an industrial undertaking making an article or thing in the list in Schedule XIII.
No double deduction on the spend
Paragraph 4 says that if you meet expenditure for the business out of the specified account as the scheme allows, no deduction is allowed for that expenditure when computing business income. The deposit already got a deduction, so the spend does not get another.
What if you sell an asset bought under the scheme?
Under section 48(3) and paragraph 5(1), if an asset acquired under the special or deposit scheme is sold or transferred before eight years from the end of the tax year of acquisition, the part of its cost that relates to the deduction allowed is treated as business profit of the year of sale.
The rule does not apply to a transfer to a "specified person": the Government, a local authority, a corporation set up by a Central, State or Provincial Act, or a Government company. It also does not apply when a firm transfers to a company on succession, if four conditions in paragraph 5(2)(b) are met (the scheme applies to the company the same way, all properties and liabilities pass to the company, and all shareholders were partners of the firm).
Worked example 3: sale of an asset within eight years
Assumptions: a grower buys a machine in tax year 2026-27 under the scheme for Rs 10,00,000. Rs 6,00,000 of that cost is relatable to the deduction allowed. The machine is sold to a private buyer in tax year 2030-31.
| Step | Working | Result |
|---|---|---|
| 1. Eight-year window | End of tax year of acquisition is 31 March 2027; eight years later is 31 March 2035 | Sale in 2030-31 is inside the window |
| 2. Buyer is a specified person? | Private buyer | No, so the exception does not apply |
| 3. Added to business profit of 2030-31 | Part of cost relatable to the deduction | Rs 6,00,000 |
How the "part relatable to the deduction" is worked out is not spelled out in the Schedule. Ask your auditor to document the basis used.
Real-life examples
Meena, a coffee planter in Karnataka. Meena runs a proprietorship that grows and cures coffee. Her profit before the deduction is Rs 24,00,000 and she deposits Rs 8,00,000 in the deposit account before the deadline. Her cap is 40% of Rs 24,00,000, which is Rs 9,60,000, so the full Rs 8,00,000 is deductible. She gets her accounts audited and files Form 182 by the specified date. Skipping the audit report would put the whole deduction at risk, because paragraph 2(1)(c) is a condition.
Ravi, a tea estate owner who closes down. Ravi stops the business and closes his account, withdrawing Rs 5,00,000 in the year of closure. Under paragraph 3(2) the whole Rs 5,00,000 is taxed as business profit of that year, as if the business had not been closed. The position differs if the account is closed because of the assessee's death, a HUF partition or a company's liquidation: paragraph 3(2) covers only closure of business and dissolution of a firm, and paragraph 3(5) switches off the unused-amount rule in paragraph 3(4) for those closures.
Common mistakes
- Computing 40% on profit after brought-forward losses. Paragraph 1(2) allows the deduction before set-off of losses under section 112.
- Depositing after the deadline. The deposit must be made before the earlier of six months from year end and the return due date.
- Forgetting the audit report. The accountant's report in Form 182 must be furnished by the specified date, one month before the return due date.
- Claiming the same deposit twice. Paragraph 2(3) bars a second deduction for an amount already allowed.
- Selling a scheme asset early. A sale inside eight years can bring the relatable cost back into profit.
- Deducting expenses paid from the account. Paragraph 4 denies the deduction for spend met from the specified account.
Quick reference
| Item | Rule |
|---|---|
| Deduction | Lower of deposit and 40% of business profit before this deduction |
| Applies to | Growing and manufacturing tea, coffee or rubber in India |
| Deposit by | Earlier of six months from tax year end and return due date |
| Audit report | Form No. 182, by one month before the return due date |
| Asset sale window | Eight years from the end of the tax year of acquisition |
| Partners or members | No second deduction for a firm, AOP or BOI's deduction |
Where this is in the Act
- Section 48: deduction, withdrawals and asset transfers (sub-sections 1 to 3)
- Schedule IX, paragraph 1: quantum of deduction; paragraph 2: conditions; paragraph 3: withdrawals; paragraph 4: no deduction on expenditure; paragraph 5: sale of assets; paragraph 6: definitions
- Section 63(5)(a): the "specified date" for audit reports
- Section 112: set-off of brought-forward losses
- Rule 290: audit report in Form No. 182
If you already follow tax audit timing, see our guide on tax audit limits and due date under the Income Tax Act 2025.
How can a CA firm track these deadlines for plantation clients?
The deposit date, the audit date and the eight-year asset window all run on different clocks. Finexo's practice management software lets a CA firm set these as tasks and reminders per client so they are not missed. It does not compute the deduction or file Form 182.
This article explains the Income Tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.
Frequently Asked Questions
What is the deduction for tea, coffee and rubber development accounts under the Income Tax Act 2025?
Section 48 with Schedule IX, paragraph 1, allows a deduction equal to the lower of the amount deposited in the specified account and 40% of business profit before this deduction.
Who can claim the deduction?
An assessee carrying on the business of growing and manufacturing tea, coffee or rubber in India during the tax year (Schedule IX, paragraph 2(1)(a)). For a firm, AOP or BOI, the deduction is not allowed again to the partners or members.
What is the last date to deposit in the development account?
Before the earlier of six months from the end of the tax year and the due date for furnishing the return of income (Schedule IX, paragraph 2(1)(b)).
Is an audit needed to claim the deduction?
Yes. The accounts of the business must be audited by an accountant before the specified date in section 63, and the report furnished by that date in Form No. 182 (Schedule IX, paragraph 2(1)(c) and rule 290).
When is money withdrawn from the account taxed?
Withdrawal on closure of business or dissolution of a firm is taxed in full as business profit. Amounts used to buy specified articles, or released for scheme purposes but not used in the same tax year, are also taxed as business profit (Schedule IX, paragraph 3).
What happens if I sell an asset bought under the scheme?
If sold within eight years from the end of the tax year of acquisition, the part of the cost relatable to the deduction is taxed as business profit of the year of sale, unless the sale is to the Government, a local authority, a statutory corporation or a Government company (Schedule IX, paragraph 5).