During your Collect Income phase, check for any convoy sea zones that are adjacent to territories that you control and that also contain warships (not transports) belonging to powers with which you are at war. For each such sea zone, first add up the total IPC value of the adjacent territories that you control, giving you the maximum number of IPCs that you can lose in that zone. Then, add up the total number of enemy warships (submarines count as two) to get your potential losses in that zone. Finally, subtract whichever of those two numbers is lower from the income you collect. Repeat this process for each eligible sea zone.
Example: Italy controls Southern Italy, Northern Italy, Yugoslavia, and Albania, and there are two UK submarines in sea zone 97. The total IPCs controlled by Italy adjacent to sea zone 97 is 10. The two subs can destroy 4 IPCs. Since 4 is less than 10 (the damage done is less than the maximum that the sea zone can sustain), Italy subtracts 4 IPCs from the income it collects.