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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Chai Bagan Pvt Ltd grows tea in Assam and manufactures it in its own factory there, selling it in India. For the tax year, its income from the sale of this tea, computed as if it were business income, is Rs 50,00,000. Under Rule 271 of the Income-tax Rules, 2026, what amount is deemed to be income liable to tax from this source?

Rs 20,00,000 is liable to tax. Under Rule 271, income from tea grown and manufactured by the seller in India is computed as business income, and 40% of it is deemed taxable. Forty percent of Rs 50,00,000 equals Rs 20,00,000.

  1. ARs 12,50,000
  2. BRs 20,00,000Correct
  3. CRs 30,00,000
  4. DRs 50,00,000

Explanation

Rule 271(1) item 4 treats income from the sale of tea grown and manufactured by the seller in India as business income, of which 40% is deemed liable to tax. So 40% of Rs 50,00,000 is Rs 20,00,000. Rs 30,00,000 is the 60% balance, which is the part not taxed.

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