Section 48 Tea development account, coffee development account and rubber development account.

Income-tax Act, 2025

At a Glance

Clause 48 of the Income Tax Bill, 2025 (Old Version) provides for tax treatment of deposits into designated development accounts for tea, coffee and rubber and for recapture rules on withdrawal or disposal of assets acquired under the relevant schemes. It matters to taxpayers engaged in growing and manufacturing tea, coffee or rubber in India, and to the tax department administering deductions and recapture. Effective dates or enactment timing are Not stated in the document.

Background & Scope

Statutory hook: Clause 48 sits within the chapter on "Profits and gains of business or profession" in the Income Tax Bill, 2025 - that is, it addresses deductible deposits and subsequent chargeability to tax for certain primary-sector activities. The clause ties deductibility and recapture to "the provisions of the Schedule IX" (repeatedly).

The text provides limited definitional content: it identifies the relevant taxpayers as "an assessee ... carrying on business of growing and manufacturing tea or coffee or rubber in India" and references deposit accounts denominated as "tea development account, coffee development account or rubber development account or any other designated account." No statutory definitions for "designated account", "scheme", "deposit scheme", or "Schedule IX" are reproduced in the document; therefore, the precise mechanics and definitions are dependent on Schedule IX and other parts of the Bill/Act.

Statutory Provision Mode

Text & Scope

The clause has three sub-sections. Sub-section (1) states that an assessee engaged in growing and manufacturing tea, coffee or rubber in India "shall be allowed a deduction on the basis of deposits into the tea development account, coffee development account or rubber development account or any other designated account and computed as per the provisions of the Schedule IX." Sub-section (2) provides that any amount withdrawn, utilised or released "shall be charged to tax in the year in which the amount is transferred or withdrawn as per the provisions of the Schedule IX." Sub-section (3) imposes a recapture rule when an asset acquired under the scheme is sold or otherwise transferred by the assessee before the expiry of eight years from the end of the tax year in which it was acquired: "such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the tax year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that tax year."

Interpretation

The clause establishes a regime of initial tax relief (deduction for qualifying deposits) followed by a recapture mechanism to neutralise tax benefit where withdrawals occur or assets are disposed of within a specified protective period. Legislative intent, as inferable from the text, is to incentivise deposits into sector-specific development accounts while preventing permanent tax avoidance by recapturing benefit on early withdrawal or premature disposal of assets acquired using those amounts. The explicit eight-year recapture period in sub-section (3) signals a policy choice to protect the revenue over a medium-term horizon; the deeming formula targets that portion of asset cost that corresponds to prior deductions, thereby effectuating partial reversal of tax benefit rather than full clawback of proceeds.

Exceptions/Provisos

Not stated in the document: any provisos, exceptions, exemptions, thresholds, or carve-outs beyond the three sub-sections reproduced. The clause itself contains no explicit provisos limiting application (for example, no treatment for transfers between related parties, no inflation adjustments, no apportionment rules beyond "such part of the cost ... as is relatable to the deduction"). Any further exceptions would need to be located in Schedule IX or elsewhere in the Bill.

Illustrations

• Example 1: An assessee deposits funds into a "tea development account" and claims deduction computed under Schedule IX. If the assessee later withdraws those funds in a subsequent tax year, under Clause 48(2) the withdrawn amount is chargeable to tax in the tax year when the transfer/withdrawal occurs as per Schedule IX.

• Example 2: An assessee uses deposited funds to acquire machinery under the scheme; if the machine is sold by the assessee within eight years from the end of the tax year of acquisition, the portion of the asset's cost that is attributable to the earlier deduction is "deemed to be the profits and gains" of the year of sale and taxed accordingly (i.e., recapture of benefit).

• Example 3: Not stated in the document: how apportionment is to be calculated for part disposals, or treatment on sale to related parties; therefore specifics on such illustrations are Not stated in the document.

Interplay

The clause repeatedly instructs that computation and chargeability are "as per the provisions of the Schedule IX." Therefore, detailed operational rules, calculation formulae, timings, compliance processes and potentially definitions are deferred to Schedule IX. No other Rules/Notifications/Circulars are mentioned in the reproduced text. Interaction with general anti-avoidance provisions, transfer pricing provisions, or other parts of the tax code is Not stated in the document.

Differences betweenSection 48of the Income-tax Act, 2025 and Clause 48 of the Income Tax Bill, 2025 (Old Version)

• Specified account nomenclature and breadth: The Bill (Clause 48) expressly names "tea development account, coffee development account or rubber development account or any other designated account" as the basis for deduction; the enacted Section 48 refers more generically to "the special account or deposit account".
  • Practical impact: The Bill's language is more explicit about permitted account types and expressly contemplates additional "designated account(s)"; the Act's broader, less prescriptive phrasing may permit administrative flexibility but less clarity for taxpayers.
• Timing of tax charge on withdrawals: Clause 48(2) (Bill) specifies that amounts "shall be charged to tax in the year in which the amount is transferred or withdrawn as per the provisions of the Schedule IX." Section 48(2) (Act) states that amounts "withdrawn or utilised or released from the aforesaid accounts at the time of closure or otherwise shall be charged to tax as per the provisions of the Schedule IX" (no explicit year-of-withdrawal phrasing).
  • Practical impact: The Bill provides clearer timing (tax year of transfer/withdrawal); the Act's formulation defers to Schedule IX but is potentially less precise about timing, which could create interpretive uncertainty about whether charge arises at closure, at withdrawal, or u/rs in Schedule IX.
• Recapture on disposal of assets: Clause 48(3) (Bill) contains a specific deeming provision: where an asset acquired under the scheme is sold/transferred within eight years from the end of the tax year in which it was acquired, "such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession" of the year of sale and charged accordingly. Section 48(3) (Act) is shorter and states that where any asset acquired as per the special scheme or deposit scheme is sold or otherwise transferred in any tax year, it "shall be charged to tax in accordance with the provisions of the said Schedule" (no eight-year period; no deeming of a relatable part of cost).
  • Practical impact: The Bill imposes a specific recapture window (8 years) and a deemed income mechanism that clearly recovers deductions previously claimed; the Act removes the explicit 8-year trigger and the specific deeming formula, deferring recapture mechanics to Schedule IX - potentially narrowing or broadening recapture depending on what Schedule IX specifies. Taxpayers face greater certainty under the Bill about recapture scope and timing, while the Act shifts the substantive rule into Schedule IX and may change the practical incidence of recapture.
• Reference to "site restoration fund" and cross-purpose text: The Bill's explanatory note (as reproduced) mentions that Clauses 48 and 49 "provide for tea development account, coffee development account and rubber development account and Site Restoration Fund..." The clause text itself is focused on tea/coffee/rubber accounts. The Act version omits any accompanying note.
• Practical impact: The Bill situates Clause 48 in a broader legislative design that includes site restoration for extractive activities; the Act, as excerpted, is self-contained and lacks that contextual pointer.
• Terminology differences ("special scheme"/"deposit scheme" vs "scheme"/"deposit scheme"): The Act uses "special scheme or the deposit scheme"; the Bill uses "scheme or the deposit scheme."
  • Practical impact: Minor drafting variance; potential interpretive effect depends on definitions in the Bill/Act (not provided here).

Practical Implications

• Compliance and risk areas: Taxpayers engaged in tea, coffee or rubber cultivation/manufacture who claim deductions under Clause 48 need to monitor withdrawals and the holding period of assets acquired under the scheme closely to determine recapture liabilities. The eight-year window imposes a medium-term compliance risk-early disposals create immediate tax charges under the deeming rule. The specific calculation of the "part of the cost ... relatable to the deduction" will be determinative; practitioners must consult Schedule IX for the precise methodology. Failure to follow the Schedule IX computation or to account for transfers/withdrawals in the year of event would expose taxpayers to assessments and interest/penalties (penalties/interest provisions Not stated in the document).
• Record-keeping/evidence points: The clause implies the need for contemporaneous and durable records of deposits into the designated accounts, documentary evidence of use of deposited funds to acquire particular assets, acquisition dates, asset cost breakdowns, and records of any transfer/withdrawal or sale including dates and consideration. Records should support apportionment between deductible-funded cost and other funding. Schedule IX likely prescribes precise evidentiary requirements; absent that text, taxpayers should maintain detailed books documenting the flow of funds between bank accounts, account ledgers for the designated accounts, asset registers linking assets to sources of finance, and sale/transfer documentation.

Key Takeaways

• Clause 48 establishes a conditional deduction for deposits into sector-specific development accounts for tea, coffee and rubber, with computation and operational detail delegated to Schedule IX.
• Withdrawals or utilisations are taxable in the tax year of transfer/withdrawal in accordance with Schedule IX, creating timing certainty in the clause text (subject to Schedule IX specifics).
• The clause contains an express eight-year recapture period for assets sold/transferred before expiry of that period, with a deeming rule targeting the portion of asset cost attributable to earlier deduction.
• The clause does not provide detailed calculation, procedural, or exceptions language within the text; those details are left to Schedule IX and other parts of the Bill/Act.
• Taxpayers must maintain records linking deposits to account entries and to assets acquired, and should anticipate recapture on early dispositions; specific compliance steps and penalties are Not stated in the document.

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Full Text:

Section 48 Tea development account, coffee development account and rubber development account.

Recapture on premature disposal reverses deduction for deposits into designated tea, coffee and rubber development accounts, taxing attributable cost on disposal. Clause 48 permits a deduction for deposits into designated tea, coffee and rubber development accounts, with computation governed by Schedule IX; withdrawals or transfers are chargeable to tax in the year of transfer/withdrawal as per Schedule IX, and disposal of assets acquired under the scheme within the protective holding period results in deeming that portion of the asset cost attributable to earlier deductions as business income in the year of sale or transfer.