Tea, Coffee, or Rubber Development Account AY 2026-27

Tea, Coffee, or Rubber Development Account

Introduction
The deduction under Section 33AB is available to assessee engaged in the business of growing and manufacturing tea, coffee, or rubber in India are eligible for deductions if they deposit funds in specific accounts for development purposes. These funds must be used as per the prescribed conditions, and misuse results in withdrawal of the deduction.

Eligibility

• Who Can Claim:

• Assessees engaged in growing and manufacturing tea, coffee, or rubber in India.
• The deduction is unavailable if only growing or only manufacturing operations are conducted.
  • When Deduction is Allowed:
• Deposits must be made in:
  • A special account with NABARD under schemes approved by the Tea, Coffee, or Rubber Board.
  • A deposit account under schemes framed by the Tea, Coffee, or Rubber Board and approved by the Central Government.
• Deposits should be made within six months from the end of the previous year or before the due date for filing the return, whichever is earlier.

Quantum of Deduction

• Lower of:

• The amount deposited in the specified accounts.
• 40% of profits from the business of tea, coffee, or rubber before claiming this deduction.

Such deduction is allowed before making any deduction of carried forward business losses under Section 72.

Claim of Deduction

To claim this deduction, the assessee is required to get his accounts audited by a Chartered Accountant and furnish the report of such audit electronically in Form 3AC before one month prior to due date of furnishing return of income under section 139(1).The audit shall not be mandatory if accounts are required to be audited under any other law and the audit report as per that law is obtained along with a report in Form 3AC for the purposes of this provision.

Withdrawal of Funds
Funds can be withdrawn for specified purposes or under circumstances like business closure, death, or liquidation. Misuse or non-utilization of funds results in the withdrawal of deductions.

1. Closure of Business:

• On business closure or firm’s dissolution, withdrawn deposit is taxable as business income. But no tax arises if withdrawn due to death of assessee, HUF partition, or company liquidation.
  2. Non-Permitted Use:
• If funds are used for ineligible assets (e.g., office equipment, fully depreciated assets), the amount utilized is added to business income.
  3. Non-Utilization:
• Unutilized withdrawn funds are deemed business income.
  4. Asset Sale Within 8 Years:
• If assets acquired under the scheme are sold within eight years, proportionate deductions are withdrawn. The deduction to be withdrawn shall be calculated as under:

Total Amount of deduction allowed	x	Deposit utilized to purchase asset which is sold within 8 years
		Total amount of deposit utilized

• Exceptions apply for transfers to government entities or succession under specific conditions.

Taxability on withdrawal of deduction:

As income from tea plantation (or coffee or rubber plantation) is treated as income partly from agriculture operations and partly from business activities, the amount to be taxed, out of the deduction withdrawn under this provision, shall be computed in accordance with Rule 7A, Rule 7B or Rule 8.

Double Deduction

Where amount deposited has been allowed as deduction in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

No Deduction to Partner or Member

In case of a Firm, AOP or BOI, No deduction shall be allowed for the amount deposited while computing the income of any partner or member, as the case may be.

 

Site Restoration Fund

 

Introduction
The deduction under Section 33ABA is available to assessees engaged in prospecting, extracting, or producing petroleum or natural gas or both in India under an agreement with the Central Government. The deduction is for deposits made into a special or site restoration account.

Eligibility and Conditions

• Who Can Claim: Businesses involved inprospecting for or extracting or production of petroleum/natural gas or both in India under an agreement with the Central Government agreement.
• Deposit Accounts:

The deduction is available when assessee deposits amount in the following accounts:

• Special account with SBI under a scheme approved by Ministry of Petroleum and Natural Gas.
• Site restoration account under a scheme by the Ministry of Petroleum and Natural Gas.

Interest credited to these accounts is also treated as a deposit for the purposes of deduction under this provision.

• Timeframe: Deposits must be made before the end of the previous year.
• Amount of Deduction: Lower of:

• Amount deposited (including interest).
• 20% of business profits before any deductions under this section.

Such deduction is allowed before making any deduction of carried forward business losses under Section 72.

Procedure to Claim Deduction

• Accounts must be audited by a Chartered Accountant.
• Submit the audit report electronically in Form 3AD one month before the due date for filing the return of income under Section 139(1).

Utilization and Withdrawal

• Permissible Uses: Funds can only be withdrawn for:

• Equipment and installation removal under an abandonment plan.
• Site restoration as per petroleum industry standards.
• Expenses to prevent hazards post-agreement expiry or termination.
  • Non-permitted Uses: Utilization for specified assets (e.g., office appliances) or any purpose beyond the scheme renders the amount as taxable business income.
  • Unutilized Amount: Funds not used as per the scheme are treated as taxable business income.
  • Asset Sale Within 8 Years:
• If assets acquired under the scheme are sold within eight years, proportionate deductions are withdrawn. The deduction to be withdrawn shall be calculated as under:

Total Amount of deduction allowed	x	Deposit utilized to purchase asset which is sold within 8 years
		Total amount of deposit utilized

• Exceptions apply for transfers to government entities or succession under specific conditions.
  • Double Deduction

o Where amount deposited has been allowed as deduction in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

• No Deduction to Partner or Member

• In case of a Firm, AOP or BOI, No deduction shall be allowed for the amount deposited while computing the income of any partner or member, as the case may be.

 

Amortisation of Certain Preliminary Expenses

 

Introduction

Indian companies or resident non-corporate assessees can claim deductions under Section 35D for preliminary expenses in 5 equal instalments starting from the year of business commencement, new unit operation, or undertaking extension.

Eligible Expenses

• For all assessee: the following expenses shall be treated as preliminary expenses.

• Preparation of feasibility and project reports.
• Conducting market or business surveys.
• Engineering services for business
• Legal charges for drafting business agreements.
• The assessee shall be required to furnish a statement in Form No. 3AF for each previous year containing the particulars of expenditure as specified above (other than legal charges) to the prescribed income tax authority. This statement shall be furnished 1 month before the due date for furnishing the return of income under Section 139(1). The statement in Form No. 3AF shall be furnished electronically under digital signature where a person is required to furnish return of income electronically under digital signature. In any other case, the statement shall be furnished electronically through Electronic Verification Code (EVC).
• Prescribe income tax authority means PDGIT/DGIT (Systems), or any authorised person.
  • For companies(Additional): a company assessee may also claim a deduction for the following expenditure:
• Legal charges for drafting and printing of the Memorandum and Articles of Association.
• Registration fees under the Companies Act, 2013.
• Expenses for issue of shares for public or debentures, including underwriting commission, brokerage, drafting charges, typing, printing, and advertisement of the prospectus.

Quantum of Deduction

1. Calculate Qualifying Amount:

• Lower of actual expenses or 5% of the project cost (or capital employed, at the option of the Indian companies).
  2. Allowable Deduction:
• 1/5th of the qualifying amount each year for 5 years.

Business Restructuring

• In amalgamation or demerger, deductions transfer to the successor Indian company for the unexpired period.

Other Conditions

• The assessee, other than a company or a co-operative society, must have its books of account audited and submit Form 3AE one month before the return filing deadline under Section 139(1) for the first year in which the deduction is claimed.

 

Amortisation of Expenditure of Amalgamation or Demerger

 

Introduction

Indian companies can claim deductions under Section 35DD for expenses incurred on amalgamation or demerger over five equal instalments in successive years.

Eligibility

• Only Indian companies incurring expenses related to amalgamation or demerger are eligible for this deduction.

Quantum of Deduction

• The entire expenditure is allowed as a deduction in five equal instalments.
• The first instalment is deductible in the year of amalgamation or demerger.

Restriction

• Deductions claimed under this provision cannot be claimed under any other provision of the Income-tax Act.

 

Expenditure Incurred on Voluntary Retirement Scheme

 

Introduction

Employers can claim deductions under Section 35DDA for payments made under a Voluntary Retirement Scheme (VRS) in five equal instalments over five successive years.

Eligibility

• The deduction applies to compensation paid to employees as part of a VRS.
• The first instalment is deductible in the year the amount is paid to the employees.

Quantum of Deduction

• The entire compensation is deductible in 5 equal instalments starting from the year of payment.
• No other deduction under any provision is allowed for the same expenditure.

Business Reorganization

• If the business undergoes reorganisation (e.g., amalgamation, demerger, or conversion), the successor entity is entitled to claim the remaining deductions for the unexpired period.

 

Expenditure on Prospecting of Minerals

 

Introduction

This provision allows Indian companies and resident assessees engaged in prospecting, extraction, or production of minerals to claim deductions under Section 35E for specified expenditures over 10 equal instalments.

Eligibility

An Indian Company and every resident assessee who is engaged in any operations relating to prospecting for, or extraction or production of, any mineral specified in Part A or Part B of the Seventh Schedule can claim a deduction under this provision.

Qualifying Expenditure

The deduction can be claimed for the qualifying expenditure incurred in the year of commercial production or in any 4 years immediately preceding the year of commercial production, which

Includes:

• Expenses incurred on any operation relating to prospecting of any mineralspecified in the Seventh Schedule.
• Expenditure on the development of a mine or other natural deposit of any such mineral.
• Sale, salvage, compensation, or insurance moneys realised in respect of any property or rights shall be reduced from such expenditure.

Excludes:

• Costs for acquiring sites or mineral deposits (or any right therein).
• Depreciable asset costs (buildings, machinery, etc.).

Quantum of Deduction

• Allowed in 10 equal instalments over 10 years, beginning with the year of commercial production.
• Deduction limited to profits from the commercial exploitation of the mineral.
• Unused deductions can be carried forward within the 10-year period but lapse thereafter.
• Once deduction is allowed for qualifying expenditure, no deduction for the same expenditure is permitted under any other provision for that or any other year.

Business Restructuring

For amalgamations or demergers, deductions transfer to the successor company for the unexpired period.

Other Conditions

The assessee, other than a company or a co-operative society, must have its books of accounts audited and submit Form 3AE one month before the return filing deadline under Section 139(1) for the first year in which the deduction under Section 35E is claimed.

 

Deductions in case of the business of prospecting, etc., of mineral oil

 

Introduction

The Income-tax Act allows specific deductions for expenses incurred in the business of prospecting, extracting, or producing mineral oils, petroleum, or natural gas, provided these expenses are covered under an agreement with the Central Government.

Eligibility Criteria

• Applicable to both resident and non-resident assessees engaged in the business of prospecting, extracting or producing mineral oils, petroleum or natural gas.
• The Central Government must have entered into an agreement directly or through an authorised entity for participation or association with the assessee.
• Deductions may be allowed in lieu of or in addition to other permissible deductions.

Eligible Expenses

• Expenditure on infructuous or abortive exploration in any area surrendered before starting commercial production.
• Any expenditure, whether incurred before or after commercial production, on drilling, exploration activities, services, or related physical assets shall be allowed as a deduction only after commercial production begins.
• Depletion of mineral oil in the mining area from the year in which commercial production begins and for the subsequent years as specified in the agreement.

Provisions for Business Transfer

If the business is transferred wholly or partially, or if any interest in the business is transferred:

• Deduction of Deficiency: If unclaimed expenses exceed transfer proceeds, the difference is deductible in the year of transfer.
• Taxability of Excess Amount: If transfer proceeds exceed unclaimed expenses, the excess, to the extent already claimed as a deduction, is taxable as business income.
• This provision does not apply to transfers under schemes of amalgamation or demerger where the resulting or amalgamated company is an Indian company.
• The successor company continues to claim deductions as if no restructuring occurred.