Rules 269 and 270 of the Draft Income-tax Rules, 2026 prescribe procedures for calculating interest and determining income that is partly agricultural and partly from business under Section 533 of the Income-tax Act.
Rule 269 provides the methodology for computing interest payable either by the assessee or by the Central Government. Where interest is calculated on an annual basis, the period must be rounded off to complete months and any fraction of a month is ignored. However, when interest is computed for every month or part of a month, even a fraction of a month is treated as a full month. The rule further states that the amount of tax, penalty, or other sum on which interest is calculated must be rounded off to the nearest multiple of ₹100, ignoring any fraction below ₹100.
Rule 270 deals with income that is partly agricultural and partly derived from business activities. It allows deduction of the market value of agricultural produce grown by the assessee or received as rent in kind when such produce is either used as raw material in the business or when its sale proceeds are included in the business accounts. No additional deduction is permitted for cultivation expenses once this deduction is allowed. The rule also explains how “market value” should be determined. If the produce is ordinarily sold in the market, its value will be based on the average market price during the relevant tax year. If it is not normally sold in raw or processed form, the value will be calculated based on cultivation expenses, land revenue or rent paid, and a reasonable profit determined by the Assessing Officer.
Extract of Rule No. 269 and 270 of Draft Income-tax Rules, 2026
Rule 269
Procedure to be followed in calculating interest under section 533(2)(u) of the Act.
In calculating the interest payable by the assessee or the interest payable by the Central Government to the assessee under any provision of the Act,—
a. where interest is to be calculated on annual basis, the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated;
b. where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month and the interest shall be so calculated;
c. the amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.
Rule 270
Determination of income, being partly from agricultural and partly from business.
(1) In terms of section 533(2)(b)(i), in case of income which is partially agricultural income and partially from business, the market value of any agricultural produce which has been raised by the assessee or received by him as rent in kind shall be allowed as a deduction where __
a. Such agricultural produce has been utilized as a raw material in such business; or
b. Sale receipts of such agricultural produce are included in the accounts of the business.
2. No further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind.
3. For the purposes of sub-rule (1) “market value” shall be deemed to be: —
a. where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant tax year;
b. where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of —
i. the expenses of cultivation;
ii. the land revenue or rent paid for the area in which it was grown; and
iii. such amount as the Assessing Officer finds, having regard to all the circumstances in each case, to represent a reasonable profit
