Rule 271 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 271 of the Income-tax Rules, 2026 taxes 35% of rubber income, 25% of cured coffee, 40% of cured and roasted coffee and 40% of tea grown and manufactured in India, and allows the cost of replanting dead or permanently useless plants.
The mechanism
Sub-rule (1) of rule 271: in terms of section 533(2)(b)(i), the incomes in the table below shall be computed as if they were income derived from business, and the percentage specified shall be deemed to be the income liable to tax. The balance is the agricultural component, which is not taxed. The 1962 parallels are rules 7A, 7B and 8.
Rule 271 does not tax a percentage of turnover. It requires the income to be computed first as business income — with all the deductions, depreciation and disallowances that entails — and only then applies the percentage to that computed figure. So every business-computation question still has to be answered in full for a tea or rubber estate; the percentage is applied at the end, to the result. Applying it earlier, to a gross figure, produces a materially different and wrong answer.
The four rates
| Sl. No. | Nature of income | Percentage taxable |
|---|---|---|
| 1 | Income from the sale of centrifuged latex or cenex, or latex-based crepes (such as pale latex crepe), or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe), or technically specified block rubbers, manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India | 35% |
| 2 | Income from the sale of coffee grown and cured by the seller in India | 25% |
| 3 | Income from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients | 40% |
| 4 | Income from the sale of tea grown and manufactured by the seller in India | 40% |
The logic running through rule 271 is that the percentage represents the non-agricultural, manufacturing contribution to the composite income. Coffee makes it explicit: grown and cured is 25%; grown, cured, roasted and grounded is 40%. Roasting and grinding are industrial operations, so a larger share of the profit is attributed to them. A coffee grower who begins roasting therefore moves from Sl. No. 2 to Sl. No. 3 and sees the taxable share rise by 15 percentage points — a change that follows from the processing decision, not from any election.
Two boundary points. Every entry requires the crop to be grown by the seller in India, so bought-in raw material is outside rule 271 altogether and its profit is fully taxable business income. And Sl. No. 1 is defined by the product, not merely by the crop — the list of latex and crepe grades, and the requirement that they be made from field latex or coagulum, is exhaustive on its own terms.
The replanting allowance
Sub-rule (2): in computing the income in sub-rule (1), an allowance shall be made for the cost of planting rubber plants, coffee plants or tea bushes in replacement of plants or bushes that have died or become permanently useless — subject to two conditions on the face of the sub-rule:
- the replacement must be in an area already planted; and
- that area must not have previously been abandoned.
Sub-rule (3): in determining that cost, no deduction shall be made for any subsidy which, under Schedule III to the Act, is not includible in the total income.
The allowance in rule 271(2) is for replacement within an existing planted area. Bringing new land under plantation is an extension, not a replacement, and falls outside it; so does replanting an area the estate had abandoned. Sub-rule (3) then resolves the question that would otherwise arise: where a replanting subsidy has been received and is exempt under Schedule III, it is not deducted from the cost. The estate gets the exempt subsidy and the full allowance on the gross cost. Netting the subsidy off is the common error, and it is exactly what sub-rule (3) forbids.
Sub-rule (4) supplies one definition: "curing" has the meaning in section 3(d) of the Coffee Act, 1942. That matters for the boundary between Sl. Nos. 2 and 3 of rule 271, since it fixes where curing ends and roasting begins.
Worked example
| Facts | Position under rule 271 |
|---|---|
| Estate sells centrifuged latex from its own rubber plants | 35% of the computed business income is taxable |
| Estate buys field latex from neighbours and processes it | Outside the rule — the plants were not grown by the seller |
| Grower sells cured coffee beans | 25% — Sl. No. 2 |
| Same grower starts roasting and grinding | 40% — Sl. No. 3 |
| Roasted coffee blended with chicory | Still Sl. No. 3 — "with or without mixing chicory" |
| Tea grown and manufactured by the seller | 40% — Sl. No. 4 |
| Percentage applied to sale turnover | Wrong — it applies to the computed business income |
| Replacement of bushes that died in an existing section | Allowance available under sub-rule (2) |
| New acreage brought under tea for the first time | Not a replacement |
| Replanting in an area abandoned five years ago | Excluded by sub-rule (2) |
| Exempt replanting subsidy received | Not deducted from the cost — sub-rule (3) |
Compliance checklist
- Compute the income as business income first, then apply the rule 271 percentage.
- Confirm the crop was grown by the seller in India for every entry relied on.
- For rubber, match the product to the named grades in Sl. No. 1.
- For coffee, decide between 25% and 40% by reference to whether roasting and grinding are done.
- Take the meaning of "curing" from section 3(d) of the Coffee Act, 1942.
- Segregate bought-in material, whose profit is fully taxable.
- Claim replanting only within an already planted, never-abandoned area.
- Do not net an exempt subsidy off the replanting cost.
Common mistakes
- Applying the percentage to turnover rather than to computed business income.
- Using 25% for roasted coffee, which belongs in Sl. No. 3.
- Blending own and bought-in crop without segregating the latter.
- Claiming extension planting as a replanting allowance.
- Deducting an exempt subsidy from the replanting cost.
- Assuming any rubber product qualifies under the Sl. No. 1 description.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallels to rule 271 are rules 7A, 7B and 8, given for tracing only. Verify the current text and percentages before computing a plantation's income.