Start with the eligible plantation business and the right tax period
For tax year 2026–27, section 48 of the Income-tax Act, 2025 and Schedule IX govern this development-account deduction for a business growing and manufacturing tea, coffee or rubber in India. A company merely trading in purchased produce does not qualify on that description alone. This guide, checked on 28 October 2026, concerns the new tax year's deposit and utilisation working; it does not replace the 1961 Act provisions applicable to FY 2025–26 / AY 2026–27 returns. Establish separately whether the company's selected tax regime permits the deduction before using the numerical models. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Build the profit base before applying the deposit ceiling
Schedule IX paragraph 1 limits the deduction to the lower of qualifying deposits and 40% of the profits of that business computed under the business-income head before this deduction. It expressly places this deduction before the section 112 brought-forward-loss set-off. Do not use turnover, the bank balance or profit after subtracting those brought-forward losses as interchangeable bases. Plantation businesses also require their applicable agricultural/business-income apportionment analysis. The examples assume that the precise paragraph 1 profit base has already been independently established; they calculate this deduction rather than the company's final taxable composite income. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Identify the actual scheme account and deposit deadline
Paragraph 2 requires the qualifying deposit before expiry of six months from the tax-year end or before the due date of furnishing the return, whichever is earlier. Use the applicable due date in the operative 2025 Act text rather than mechanically carrying over an earlier enactment's wording or treating a later actual filing date as extra deposit time. The special account is with the National Bank, defined in this Schedule as NABARD, under the approved special scheme; the alternative deposit account must meet the relevant Board's approved deposit-scheme conditions. An ordinary savings deposit, an internal earmarking entry or a site-restoration account is not enough. Retain the operative scheme, account opening, bank credit and supported return due date together. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Do not let reporting and year allocation become afterthoughts
Paragraph 2 also requires the stated accountant's audit and prescribed report by the specified date referred to in section 63. Where another law already requires an audit, the Schedule provides for that audit plus the additional prescribed report within the required time. An auditor's general financial-statement opinion is not automatically that additional report. This article does not identify an unverified form number or future filing extension. Allocate each deposit to its supported tax year and retain the prior deduction history: paragraph 2(3) prevents allowing the same amount again in another tax year. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Reconcile withdrawals to permitted use in the relevant year
Paragraph 3 regulates permitted withdrawals and the tax treatment of closure, release and utilisation. For an ordinary permitted withdrawal used only partly for the scheme purpose within that tax year, paragraph 3(4) brings the unutilised portion into business profits. It is not sufficient that management expects to spend it later. Paragraph 3(5) contains specified exceptional circumstances, including the stated liquidation-related situation, which require their own facts; do not apply a generic closure calculation to every case. Purchases of the excluded articles addressed in paragraph 3(3), as defined in paragraph 3(6) need a separate deemed-profit test even where management calls the expenditure developmental. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Close the account-to-computation bridge without a second deduction
Paragraph 4 denies a further deduction for expenditure met from the covered account in the manner it describes. Tag the funding source on each invoice and reverse an expense already deducted in arriving at the computation base where that paragraph requires it. Paragraph 5 also addresses sale or transfer of scheme-funded assets before expiry of eight years from the end of the tax year in which the asset was acquired, with stated exceptions and conditions. Maintain an asset register linking the original allowed expenditure, acquisition year and transfer event. Neither a bank withdrawal nor an asset sale should enter the return solely through a cash-flow reconciliation. Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX.
Applicable primary references
Income-tax Act, 2025 as amended by Finance Act 2026: section 48 and Schedule IX
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Deposit below the ceiling
Assume an eligible company has a verified paragraph 1 profit base of ₹1,00,00,000 and qualifying current-year deposits of ₹30,00,000. The 40% ceiling is ₹40,00,000. The deduction is the lower amount, ₹30,00,000, subject to all eligibility and reporting conditions.
Illustrative example 2: Deposit above the ceiling
With the same ₹1,00,00,000 profit base and ₹50,00,000 qualifying deposits, the ceiling remains ₹40,00,000. The current deduction is ₹40,00,000. The unallowed ₹10,00,000 is not an automatic fresh deduction in the following year merely because it remains in the bank.
Illustrative example 3: Preserve the order before brought-forward loss
Assume verified paragraph 1 profits of ₹1,00,00,000, a separately eligible brought-forward business loss of ₹20,00,000 and deposits of ₹40,00,000. The deposit ceiling is ₹40,00,000, not 40% of ₹80,00,000 or ₹32,00,000. Any later loss set-off requires its own computation; this illustration isolates the paragraph 1 ceiling.
Illustrative example 4: Ordinary withdrawal partly unused
Assume a valid scheme withdrawal of ₹10,00,000, qualifying utilisation within that tax year of ₹6,00,000 and no paragraph 3(5) exception. The unutilised portion is ₹4,00,000. Paragraph 3(4)'s deemed-profit working must therefore address ₹4,00,000, rather than deferring it solely on a next-year spending plan.
Illustrative example 5: Account-funded expense already deducted in the working
Assume the draft computation starts with ₹50,00,000 after deducting an ₹8,00,000 expense to which paragraph 4's prohibition applies because it was met from the covered account. Restoring that deduction gives ₹58,00,000 before other adjustments. This is an income-computation bridge, not an instruction to reclassify the statutory books.
Illustrative example 6: Keep a previously allowed deposit out of a second claim
Assume the bank history includes a prior-year deposit of ₹5,00,000 already allowed and new qualifying deposits of ₹2,00,000. With a sufficient current profit ceiling, the current deposit population is ₹2,00,000, not ₹7,00,000. Keep the ₹5,00,000 in the account balance reconciliation without deducting it again.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Establish business eligibility | Evidence of growing and manufacturing in India |
| 2 | Check the applicable tax year and regime | Period-specific law and deduction eligibility memorandum |
| 3 | Identify the operative approved scheme | NABARD or relevant Board account documentation |
| 4 | Compute the paragraph 1 profit base | Business-income bridge and separate apportionment analysis |
| 5 | Reconcile actual deposits | Bank credits, tax-year allocation and earlier claims |
| 6 | Check the earlier deadline | Six-month boundary compared with the applicable return-furnishing due date |
| 7 | Apply the lower-of calculation | Qualifying deposit total and 40% ceiling before section 112 set-off |
| 8 | Complete audit and report requirements | Section 63 specified date and prescribed-report evidence |
| 9 | Test withdrawals and funded expenditure | Permitted use, year of use, paragraph 3 exceptions and paragraph 4 adjustments |
| 10 | Review scheme-funded assets and close the roll-forward | Acquisition, transfer, recapture tests and closing bank reconciliation |
Sixteen practitioner FAQs
1. Does this guide cover AY 2026–27 return preparation?
No. It addresses tax year 2026–27 under the 2025 Act; the earlier year's return needs its applicable earlier law.
2. Is produce trading alone the qualifying business?
The section requires growing and manufacturing the specified produce in India.
3. Are all three plantation products covered?
Section 48 names tea, coffee and rubber, subject to its and Schedule IX's conditions.
4. Is the ceiling a percentage of turnover?
No. Paragraph 1 uses the specified business profits computed before this deduction.
5. Should section 112 brought-forward losses reduce that ceiling first?
No. Paragraph 1 expressly gives this deduction priority before that set-off.
6. Do the examples compute final composite plantation taxable income?
No. They assume the independently established paragraph 1 base; apportionment remains a separate working.
7. Is an ordinary earmarked bank account sufficient?
No. Verify the special-account or deposit-scheme requirements and the approved scheme.
8. Which institution is the National Bank here?
Schedule IX defines it as the National Bank for Agriculture and Rural Development, NABARD.
9. Can a later actual return filing extend the deposit deadline?
No. Paragraph 2 compares the six-month boundary with the return-furnishing due date, whichever is earlier.
10. Is a general statutory audit enough without checking the additional report?
No. Apply paragraph 2's particular reporting condition and specified date.
11. Does an excess deposit automatically become next year's deduction?
No. A later deduction needs its own statutory basis; the bank balance alone does not establish it.
12. Can a deposit allowed last year be deducted again?
Paragraph 2(3) prevents the covered duplicate allowance.
13. Does every withdrawal create an immediate addition of the entire amount?
The purpose, use, year and particular paragraph 3 provision must be examined.
14. Can unused ordinary withdrawals simply be parked until next year?
Paragraph 3(4) addresses the portion not used within the relevant tax year, subject to its stated exception.
15. Can account-funded expenditure generate a second deduction?
Paragraph 4 denies the further deduction within its scope.
16. Why track an asset after the original deduction?
Paragraph 5 contains an early-transfer recapture mechanism and exceptions requiring continuing evidence.
Conclusion
Calculate the development-account deduction using eligible deposits and the 40% business-profit ceiling, then reconcile withdrawals and expenditure funded from the account.