Rule 125 — Furnishing of authorisation and maintenance of documents, etc. for the purposes of section 176. Made under s.176, s.263 of the Income-tax Act, 2025.
Rule 125 gives effect to Section 176 and Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rules (1) to (4) deal with the authorisation. For section 176(3)(a) the authorisation to be submitted by the assessee shall be in Form No. 61. The assessee is to cause the first copy of the filled up Form No. 61 to be deposited with or transmitted to the financial institution referred to in section 176(3)(a), and to submit the second copy, along with evidence of the first copy having been deposited or transmitted, to the Assessing Officer having jurisdiction over him. To ensure that the authorisation is legally enforceable, the assessee shall take all necessary steps as are required under any law in force in India or outside India.
Sub-rule (5) deals with documentation for section 176(3)(b). An assessee who has entered into a transaction with a person located in a notified jurisdictional area — the specified person — shall, in addition to the information and documents referred to in rule 84(1), keep and maintain: a description of the ownership structure of the specified person, including the name and address of individuals or entities, whether located in the notified jurisdictional area or outside, having directly or indirectly more than 10% shareholding or ownership interests; a profile of the multinational group of which the specified person is a part, with the name, address, legal status and country of tax residence of each enterprise in the group with whom the assessee has transacted, and the ownership linkage among them; a broad description of the specified person's business and industry; and any other information, data or document relevant to the transaction.
Sub-rule (6) fixes the period the information must cover — up to the due date of filing the return of income under section 263(1). Sub-rule (7) fixes how long it must be kept: eight years from the end of the financial year succeeding the relevant tax year.
Section 176 deals with transactions with persons in notified jurisdictional areas, where the Department cannot readily obtain information from the other country. Sub-section (3)(a) requires an authorisation so that the Indian authorities can seek information from the foreign financial institution directly, and this rule gives that authorisation a form, a route and a requirement that the assessee make it enforceable where the institution sits. Sub-section (3)(b) requires documents, and the rule specifies which — ownership, group structure and business — the things that show who is behind the counterparty.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Ownership interest that must be described | More than 10% shareholding or ownership interests | Individuals or other entities holding directly or indirectly in the specified person, whether located in the notified jurisdictional area or outside | Sub-rule (5)(a) |
| Period the information and documents must cover | Up to the due date of filing of return of income under section 263(1) | Information and documents specified in sub-rule (5) | Sub-rule (6) |
| Retention period | Eight years from the end of the financial year succeeding the relevant tax year | Information and documents specified in sub-rule (5) | Sub-rule (7) |
Form No. 61 is filed twice over, and both filings matter: the first copy goes to the financial institution, and the second goes to the Assessing Officer with evidence that the first was deposited or transmitted, so filing with the officer alone leaves the requirement unmet. Sub-rule (4) puts a substantive duty on the assessee that goes beyond form — the authorisation must actually be legally enforceable, and the assessee must take whatever steps the law of the place, in India or outside, requires for that. The sub-rule (5) documentation is additional to rule 84(1), not a substitute for it. The retention period runs from the end of the financial year succeeding the relevant tax year, so it ends more than eight years after the transactions it covers.
A firm makes payments during the tax year to a company located in a notified jurisdictional area. It files Form No. 61 with that company's bank, then gives the second copy with the transmission evidence to its Assessing Officer. It also keeps, alongside its rule 84(1) documentation, the ownership structure showing every holder of more than 10% in the counterparty, the group profile, and a description of the counterparty's business — and keeps all of it for eight years from the end of the financial year succeeding that tax year.
You meet it when a payment to a notified jurisdictional area is made: Form No. 61 goes to the foreign financial institution and to the Assessing Officer, and the sub-rule (5) documents are called for in assessment or in any enquiry into the transaction.
For the purposes of section 176(3)(a), the authorisation to be submitted by the assessee, shall be in Form No. 61.
the assessee shall take all necessary steps as are required under any law in force in India or outside India
The information and documents specified in sub-rule (5) shall be kept and maintained for a period of eight years from the end of the financial year succeeding the relevant tax year.