Income Tax · Business & Profession Taxability · Updated August 2026

Income Tax for Coffee Growers in India 2026: ITR Code, Rule 7B, 25%/40% Business Income & Agricultural Split

Finin2min answer

For qualifying coffee grown and processed by the seller in India, Rule 7B splits computed income: 25% business/75% agricultural for grown-and-cured coffee, or 40% business/60% agricultural where it is also roasted and grounded.

AY 2026-27 Nature-of-Business code: 01002 — Growing and manufacturing of coffee.

For Coffee Growers & Manufacturers, AY 2026-27 reports FY 2025-26 under the Income-tax Act, 1961; this matters because the special agricultural/business composite computation must be preserved rather than replaced by a generic presumptive shortcut. The Income-tax Act, 2025 applies from 1 April 2026 for tax year 2026-27. Its resident presumptive provisions are consolidated in section 58, books in section 62 and tax audit in section 63. Therefore, the AY 2026-27 return still follows the 1961-Act form/rule framework, while current-year planning should separately track the 2025-Act position.

Why this business needs a separate tax guide

Coffee also has a statutory composite-income rule. Under Rule 7B, coffee grown and cured in India is computed as business income and then 25% is treated as taxable business income; where coffee is grown, cured, roasted and grounded, 40% is taxable business income. The balance is agricultural income. A good return therefore starts from the commercial model—who pays, what is supplied, whether the taxpayer acts as principal or agent, how GST invoices are raised, and which receipts appear in AIS/26AS.

AY 2026-27 ITR business/profession code

Suggested code(s): 01002 — Growing and manufacturing of coffee.

The code above is taken from the official AY 2026-27 ITR-3 schema for Coffee Growers & Manufacturers. It classifies the activity for return reporting; it does not itself grant 44AD/44ADA eligibility, a GST exemption or a deduction. If multiple material activities exist, keep an activity note showing why 01002 represents the dominant stream and how other streams were reported.

Map the receipts before calculating tax

Typical receipts include:

coffee grown and cured by assessee
coffee grown/cured/roasted/ground by assessee
green coffee sales
bought-bean trading/processing where special split may not apply
other estate/service receipts

For Coffee Growers & Manufacturers, build turnover from gross invoices/contracts and supporting statements, not merely from net bank credits. TDS, gateway/agent deductions, refunds, advances, credit notes and genuine pass-through collections should each be bridged separately; amounts excluded as agency/pure-agent money need documentary support.

Which ITR should be filed?

An individual/HUF reporting Coffee Growers & Manufacturers with the special composite agricultural/business computation will ordinarily use ITR-3 when business/professional schedules are required. ITR-4 should not be used as a device to bypass the specific Rule 7A/7B/8 computation. Entity type, other income, foreign assets/income and the return-form exclusions must still be checked.

Presumptive taxation: 44AD, 44ADA or a special rule?

This activity has a specific composite agricultural/business income rule. The special rule should be applied before considering generic presumptive taxation; do not replace the statutory composite computation with section 44AD merely for convenience.

For Coffee Growers & Manufacturers, presumptive taxation—where legally available—changes how profit is computed, not the need to prove gross receipts. Keep invoices/contracts, bank/UPI/platform statements, GST records and TDS credits, and compare the deemed margin with the actual cost structure before opting in.

GST position

Coffee products are subject to GST based on product/processing classification. Income-tax agricultural split does not determine GST treatment.

The GST threshold test for Coffee Growers & Manufacturers must follow the actual mix of goods and services and the State/registration facts. Many service businesses work with the general ₹20 lakh framework, while eligible exclusive suppliers of goods can have a higher notified threshold; lower/special thresholds and section 24 compulsory-registration situations can override the headline number. The sector-specific supply classification above should therefore be checked before relying on turnover alone.

TDS, AIS and Form 26AS

Goods-sale receipts and service contracts should be reconciled separately. Rule 7B is an income computation rule, not a turnover/TDS rule.

For Coffee Growers & Manufacturers, perform a three-way bridge between books/invoices ↔ bank/platform/principal settlements ↔ AIS/26AS/TDS certificates. A difference is not automatically an error, but timing, GST, advances, credit notes, reimbursements, foreign exchange or payer misreporting should be identified rather than left as an unexplained plug.

Expenses under regular computation

Common costs, when genuinely incurred for earning business/professional income and supported by evidence, include:

estate cultivation costs
curing/processing
roasting/grinding where applicable
labour/power
packing/freight
plant/machinery depreciation

For Coffee Growers & Manufacturers, an expense is not deductible merely because it appears in the business bank account. Personal/private use, income-tax, penalties, unsupported cash outgo and costs lacking business nexus require separate treatment; durable equipment/assets may need capitalisation and depreciation rather than an immediate 100% claim.

Books of account and tax audit

For Coffee Growers & Manufacturers as a business, FY 2025-26 section 44AB generally uses a ₹1 crore audit threshold, increased to ₹10 crore where both cash receipts and cash payments satisfy the 5% conditions. Where a valid section 44AD position is chosen, the presumptive rules and any lower-profit consequences must be tested separately rather than applying the audit threshold mechanically. For this vertical, books should be capable of reproducing estate/curing/roasting records and the Rule 7B composite-income working. From tax year 2026-27, section 63 of the Income-tax Act, 2025 carries the tax-audit framework forward, with the prescribed Form 26 reporting architecture; section 62 governs books.

Even where Coffee Growers & Manufacturers stays below a tax-audit threshold, the books should still be strong enough to reproduce turnover, receivables/advances, major expenses and tax credits from source records. Statutory minimums are not a substitute for an evidentiary trail when GST, TDS, cash collections, inventory or client money is involved.

Revenue-stream tax and evidence map

Different receipts in the same business can create different reporting questions. Use this map as a control, not as a substitute for reading the underlying contract.

Revenue stream	What to verify before filing
coffee grown and cured by assessee	Trace the gross contract/invoice value separately from TDS, marketplace or agent deductions.
coffee grown/cured/roasted/ground by assessee	Keep the agreement/order and identify whether this is own revenue, reimbursement, royalty/licence, goods sale or pass-through collection.
green coffee sales	Map the receipt to the correct financial year using invoice, performance/delivery and advance/credit-note evidence.
bought-bean trading/processing where special split may not apply	Reconcile the customer statement with bank settlement and GST treatment; do not let a net remittance redefine gross turnover.
other estate/service receipts	If this stream has a different GST/TDS character from the core activity, maintain it as a separate ledger rather than blending it into one sales code.

Expense substantiation: what evidence should exist?

estate cultivation costs: retain vendor invoice + payment proof; document business nexus and separate personal/private use where relevant.
curing/processing: retain contract/work order + invoice; document business nexus and separate personal/private use where relevant.
roasting/grinding where applicable: retain asset/usage record where capital or mixed-use; document business nexus and separate personal/private use where relevant.
labour/power: retain project/customer linkage + payment trail; document business nexus and separate personal/private use where relevant.
packing/freight: retain periodic statement/ledger reconciliation; document business nexus and separate personal/private use where relevant.

Rule 7B changes the business percentage depending on whether own-grown coffee is only cured or is also roasted/ground. Maintain processing-stage evidence.

Worked example

The statutory percentage applies to composite income computed after permissible deductions, not directly to turnover. For illustration:

Particular	Amount
Composite income after permissible deductions	₹20.00 lakh
If grown and cured: taxable business component — 25%	₹5.00 lakh
If grown and cured: agricultural component — 75%	₹15.00 lakh
If grown, cured, roasted and grounded: taxable business component — 40%	₹8.00 lakh
Corresponding agricultural component — 60%	₹12.00 lakh

The special rule applies only to the qualifying own-grown/processed activity described in the rule. Bought-in trading or separate services can require a different computation.

Sector-specific control file

Before filing, keep a short year-end evidence file containing:

Coffee Growers & Manufacturers monthly gross sales/receipt bridge
bank/UPI/card/platform/principal settlements for coffee grown and cured by assessee
GST turnover bridge by taxable/exempt/non-GST stream where relevant
AIS/26AS/TDS mapping to customer/payer and invoice
customer/vendor ledger ageing and advances
asset/depreciation schedule for estate cultivation costs
major contracts/licences/registrations supporting coffee grown/cured/roasted/ground by assessee
year-end stock/WIP/client-money or activity register appropriate to Coffee Growers & Manufacturers

For Coffee Growers & Manufacturers, the objective of this control file is to let a reviewer move from the tax return back to the commercial evidence without guesswork. If one bridge cannot be reproduced, fix the books before changing the tax figure to make the return balance.

Common mistakes

using 25% business split for roasted/ground own-grown coffee
applying the percentages to turnover instead of computed income
applying Rule 7B to bought-in beans without checking facts
assuming all coffee-estate income is agricultural
choosing an ITR code from a secondary blog instead of the current official schema
treating TDS as an expense instead of a tax credit
assuming GST turnover and income-tax turnover must always be identical without preparing a reconciliation
showing a professional review date that did not actually occur

Practical filing checklist

map coffee grown and cured by assessee and other receipts to the correct income head
document why 01002 is the appropriate AY 2026-27 activity code
apply the correct presumptive/special-rule test for Coffee Growers & Manufacturers before choosing ITR-4
reconcile coffee grown and cured by assessee to bank/platform/GST/TDS evidence
separate capital treatment for items such as estate cultivation costs from routine revenue costs
check books, tax-audit, advance-tax and GST-registration requirements using actual figures
retain direct official sources plus a note resolving the key risk: using 25% business split for roasted/ground own-grown coffee

Frequently asked questions

Which ITR is usually relevant for Coffee Growers & Manufacturers?

For an individual/HUF using regular business/professional computation, ITR-3 is the usual starting point. ITR-4 is available only where a valid presumptive scheme and all form-level eligibility conditions are satisfied; entity forms differ for companies/LLPs.

What AY 2026-27 business/profession code should be considered?

The official ITR-3 schema describes 01002 as Growing and manufacturing of coffee. If the taxpayer carries more than one material activity, document why the chosen code represents the dominant activity rather than selecting a convenient code for tax treatment.

Can presumptive taxation be used?

Do not use 44AD to replace the special composite rule applicable to qualifying Coffee Growers & Manufacturers. Compute the composite income under the specific rule first.

Is GST determined by the income-tax business code?

No. The ITR code classifies the income-tax activity; GST follows the actual supply, exemption/rate entry, aggregate-turnover and registration/place-of-supply rules. For Coffee Growers & Manufacturers, the sector-specific GST discussion above should be applied transaction by transaction.

What records matter most if the return is questioned?

Keep evidence for the largest revenue stream (coffee grown and cured by assessee) and the largest recurring cost (estate cultivation costs), along with bank/UPI settlements, invoices and year-end ledgers.

What is one avoidable filing error?

A recurring risk is using 25% business split for roasted/ground own-grown coffee. The return should reconcile the commercial documents before the tax form is finalised.

Does the Income-tax Act, 2025 change AY 2026-27 filing?

No. AY 2026-27 still reports FY 2025-26 under the Income-tax Act, 1961. The 2025 Act applies from 1 April 2026 for tax year 2026-27, so it matters for current-year planning rather than rewriting the law applicable to FY 2025-26.

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Disclaimer: General educational information only. Business-code selection, presumptive eligibility, GST registration/rate, TDS, agricultural-income treatment and deductions depend on actual facts, entity, State, turnover, contracts and the law applicable to the relevant period. Verify the current official form/notification before filing.