Written by Akhter Syed in Taxation Income Tax Rules 2002 allow cultivators and recipients of agricultural produce as rent-in-kind to claim market value deductions when using their produce in taxable businesses. The Federal Board of Revenue (FBR) has clarified the tax treatment of agricultural produce used as raw material in businesses during Tax Year 2027. According to Rule 11 of the Income Tax Rules, 2002, updated up to September 15, 2026, cultivators and recipients of agricultural produce as rent-in-kind can claim deductions for the market value of produce used as raw material in businesses chargeable to tax under the head ‘Income from Business’. Valuation of agricultural produce Under Rule 11, the market value of agricultural produce raised or received as rent-in-kind and used in a business shall be allowed as a deduction when calculating taxable business income. The FBR has prescribed two methods for determining the market value. Where agricultural produce is ordinarily sold in the market in its raw state or after processes…