Section 33AB Of The Income Tax Act: Tax Deduction On Growing Or Manufacturing Tea, Coffee And Rubber
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30 May 2022If you have a business that deals with tea, coffee, or rubber, you could get a tax deduction under Section 33AB of the Income Tax Act. However, you must fulfil a few crucial requirements to claim tax deductions under this section. Read on to know all the details about Section 33AB.
Table of contents
- What is Section 33AB of the Income Tax?
- Places to Deposit the Amount for Claiming Deductions under Section 33AB of the Income Tax Act
- Time Period to Deposit the Amount for Claiming Deductions under Section 33AB
- What is the Deduction Amount under Section 33AB of the Income Tax Act?
- Important Points about Deduction under Section 33AB
- Final Word
- FAQs on Section 33AB
What is Section 33AB of the Income Tax?
As per Section 33AB of the Income Tax Act, if a business owner engages in manufacturing and cultivating coffee, tea and rubber, they are eligible for tax deductions. To avail of tax benefits, business owners need to deposit the requisite amount in a specified ‘Deposit Account’ or ‘Special Account.’
Places to Deposit the Amount for Claiming Deductions under Section 33AB of the Income Tax Act
Assessees need to deposit the amount in any of these:
- Any deposit account that the Government of India approves
- NABARD (National Bank for Agricultural and Rural Development)
Time Period to Deposit the Amount for Claiming Deductions under Section 33AB
Given below are details related to the time period for depositing the requisite amount:
- An assessee needs to deposit the amount before the due date of filing the Income Tax Return.
- Taxpayers need to deposit the amount before completion of 6 months from the end of the previous year
What is the Deduction Amount under Section 33AB of the Income Tax Act?
Details of the deduction amount under Section 33AB of the Income Tax Act are as follows:
- Taxpayers can avail of a deduction on the amount deposited.
- A deduction is available on the profits that fall under the head ‘Profits and gains of business and profession’.
Assessees must remember that the deduction is available on the lower of the two amounts mentioned above.
Important Points about Deduction under Section 33AB
Given below are important points that one must remember:
- Deductions under Section 33AB will be available only if there is a proper tax audit.
- If an assessee has availed deductions on the deposited amount, they cannot calculate the amount as expenses under ‘profits and gains of business and profession.’
Also Read: List of 11 Tax-Free Income Sources In India (2022)
Final Word
If you have a business dealing with tea, coffee or rubber, you need to be aware of Section 33AB of the Income Tax Act. It provides a legal framework which enables taxpayers to seek deductions for specified businesses. However, they need to deposit the requisite amount in a specified account to avail this tax benefit.
FAQs on Section 33AB
Ans: One can withdraw the amount in these situations:
If a business shuts down
If taxpayers pass away
If liquidation of the firm takes place
If a division of HUF (Hindu Undivided Family) takes place
Ans: Taxpayers must be aware of an important condition for tax audit under Section 33AB. A registered chartered accountant must audit accounts of their business. Moreover, the audit needs to be completed before the stipulated date mentioned by the council.
Ans: Taxpayers need to fill out Form no. 3AC for availing tax benefits under Section 33AB of the Income Tax Act.
Ans: If you withdraw the amount and use it for buying the following, the Income Tax officials will deem it as ‘income’:
Plant and machinery installed in office premises or guest houses of the office
Instruments and tools, including computers
Plant and machinery in the industrial premises, installed for manufacturing, construction and production
Plant and machinery for which the real cost is allowed as a deduction under ‘profits and gains of business and profession.’
Ans: The Central Government has decided to repeal the Coffee Act of 1942 and Tea Act of 1953. This is because the existing provisions had become redundant. Instead, GOI wishes to bring in new regulations under the Tea (Promotion and Development) Act 2022, which would benefit the growth of the tea and coffee industry.
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