Rule 235 of the Income-tax Rules, 2026

Where this rule sits

Rule 235 gives effect to Section 506, Section 9, Section 511 and Section 515 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.

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What this rule does

Sub-rule (1) requires every Indian concern referred to in section 506 to maintain and furnish information and documents in accordance with this rule. Sub-rule (2) requires the information to be furnished in Form No. 163, electronically under digital signature, to the Assessing Officer having jurisdiction over the Indian concern, within ninety days from the end of the financial year in which any transfer of the share of, or interest in, a foreign company or entity referred to in section 9(10)(a) has taken place; but where the transaction has the effect of directly or indirectly transferring the rights of management or control in relation to the Indian concern, the information must be furnished within ninety days of that transaction.

Sub-rule (3) lists what the Indian concern must maintain, with an English translation as required, and produce when called upon by any income-tax authority to substantiate the information furnished: details of the immediate, intermediate and ultimate holding company or entity; details of other entities in India of the group; the holding structure before and after the transfer; any transfer contract or agreement in respect of the share or interest; financial and accounting statements of the foreign company or entity for two years prior to the transfer; information on the decision or implementation process of the overall arrangement; information on the foreign company or entity and its subsidiaries as to business operation, personnel, finance and properties, and internal and external audit or the valuation report forming the basis of the consideration; the asset valuation report and supporting evidence determining the place of location of the share or interest; details of tax paid outside India relating to the transfer; the valuation report on the Indian asset and total assets certified by a merchant banker or accountant as defined in section 515(3)(b), with supporting evidence; and documents issued in connection with the transactions under the accounting practices followed.

Sub-rule (4) allows one Indian concern to furnish for all, where the group has designated it to do so and has conveyed that in writing to the Assessing Officer; sub-rule (5) provides that nothing in the rule shall have effect if the designated Indian concern fails to furnish the information in accordance with the rule. Sub-rule (6) requires the Director General of Income-tax (Systems) to send one copy of Form No. 163 to the Assessing Officer having jurisdiction over the transferor whose income is chargeable as per section 9(10). Sub-rule (7) fixes the retention period at eight years from the end of the relevant tax year. Sub-rule (8) defines constituent entity and group by reference to section 511(10)(d) and (e), and defines immediate, intermediate and ultimate holding company or entity.

Why it is there

Where shares of a foreign company deriving value from Indian assets change hands, the taxable event happens entirely offshore and the Department's only reliable point of contact is the Indian concern. Section 506 makes that concern furnish information but leaves the form, the period and the content to be prescribed. The rule sets a ninety-day clock, shortens it where management or control of the Indian concern itself moves, and requires the concern to hold the valuation and structure documents that decide whether and how much is chargeable under section 9(10).

Who it applies to

• Every Indian concern referred to in section 506
• An Indian concern designated by the group to furnish information on behalf of all Indian concerns that are constituent entities
• The Assessing Officer having jurisdiction over the Indian concern, and the Assessing Officer having jurisdiction over the transferor
• A merchant banker or an accountant as defined in section 515(3)(b) certifying the valuation report

The figures, and what each one turns on

The forms it prescribes

• Form No. 163 — information furnished by an Indian concern under section 506 on a transfer of a share of, or interest in, a foreign company or entity

What this means in practice

There are two different ninety-day periods and they start from different events. The ordinary period runs from the end of the financial year of the transfer; the period where the transaction moves rights of management or control in relation to the Indian concern runs from the transaction itself, and will usually expire much earlier. Sub-rule (5) is the trap in the group-designation option: designating one Indian concern under sub-rule (4) relieves the others only for so long as the designated concern actually furnishes the information in accordance with the rule, and if it fails, nothing in the rule has effect — so the relief the designation gave falls away. What is furnished is Form No. 163; what is maintained under sub-rule (3) is much wider and need only be produced when an income-tax authority calls for it in the course of a proceeding, with an English translation as required. The valuation report under sub-rule (3)(j) must be certified by a merchant banker or an accountant as defined in section 515(3)(b), so an internal valuation will not answer it.

An example

Shares in a foreign holding company are transferred in October, and the transfer carries with it control of its Indian subsidiary. Because rights of management or control in relation to the Indian concern move, the Indian concern must furnish Form No. 163 electronically under digital signature within ninety days of that transaction, not within ninety days of the end of the financial year. It must also hold the certified valuation of the Indian asset and total assets, and keep the sub-rule (3) documents for eight years from the end of the relevant tax year.

Where you meet this rule

The Indian concern meets it as a Form No. 163 filing after an offshore transfer, and again when an income-tax authority calls for the sub-rule (3) documents. The transferor meets it indirectly: sub-rule (6) sends a copy of the form to the Assessing Officer having jurisdiction over him.

The words themselves

What people get wrong

• Using the financial-year-end start date where control moved. Sub-rule (2) runs ninety days from the transaction itself where rights of management or control in relation to the Indian concern are transferred.
• Assuming a group designation ends the obligation. Sub-rule (5) removes the effect of the rule if the designated Indian concern fails to furnish the information as required.
• Filing Form No. 163 and keeping nothing else. Sub-rule (3) requires a separate body of documents, with English translation as required, to be produced on demand.
• Relying on an in-house valuation. Sub-rule (3)(j) requires the valuation report on the Indian asset and total assets to be certified by a merchant banker or an accountant as defined in section 515(3)(b).
• Furnishing the form in paper or by email. Sub-rule (2) requires it electronically under digital signature to the Assessing Officer having jurisdiction over the Indian concern.