Skip to content

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

Meera Tea Estates Ltd, an Indian company, grows and manufactures tea in Assam and sells it. Its sale proceeds from this tea are Rs 80,00,000. Under Rule 271 of the Income-tax Rules, 2026, income from the sale of tea grown and manufactured by the seller in India is computed as if it were business income and a stated percentage is deemed to be income liable to tax. What portion of the Rs 80,00,000 is treated as income liable to tax, taking the computed business income to be the full sale proceeds for this exercise?

Rs 32,00,000 is liable to tax. Rule 271 deems 40% of the income from the sale of tea grown and manufactured by the seller in India to be taxable, and 40% of Rs 80,00,000 equals Rs 32,00,000. The other percentages relate to coffee or rubber.

  1. ARs 20,00,000
  2. BRs 28,00,000
  3. CRs 32,00,000Correct
  4. DRs 48,00,000

Explanation

Rule 271(1) item 4 fixes 40% of the income from the sale of tea grown and manufactured by the seller in India as the income liable to tax. 40% of Rs 80,00,000 is Rs 32,00,000. Rs 20,00,000 uses 25%, the coffee rate (grown and cured only). Rs 28,00,000 uses 35%, the rubber rate.

Did you get it right without looking?

One question tells you little. A timed set on Incomes which do not form part of Total Income shows your real accuracy, how long you take and where you lose marks.

Practise Incomes which do not form part of Total IncomeFree diagnostic mock

More Incomes which do not form part of Total Income questions