Q.A company grows and manufactures tea in India. During the previous year 2025-26, its total (composite) income from this activity is ₹10,00,000. Compute the portion of this income treated as agricultural income (exempt) and the portion treated as business income (taxable) for AY 2026-27.

Tea grown and manufactured in India is a composite activity with a fixed statutory split.

Rule 8 fixes a 60% agricultural / 40% business split for tea.

Since the company both grows and manufactures tea in India, Rule 8 of the Income-tax Rules, 1962 applies, which fixes the composite income split at 60% agricultural (exempt) and 40% business (taxable), regardless of the actual costs incurred in growing versus manufacturing.

Agricultural income (exempt) = 60% × ₹10,00,000 = ₹6,00,000

Business income (taxable) = 40% × ₹10,00,000 = ₹4,00,000

Only the ₹4,00,000 business portion enters the company's Total Income and is chargeable to tax for AY 2026-27; the ₹6,00,000 agricultural portion is fully exempt under Section 10(1).

Reversing the percentages and treating 40% as agricultural and 60% as business — Rule 8's split for TEA is 60% agricultural / 40% business; it is easy to confuse this with coffee's different splits (Rule 7B), so always confirm which crop's rule applies before assigning the percentages.