Rule 90 of the Income-tax Rules, 2026

Where this rule sits

← Rule 89  ·  Rule 91 →

What this rule does

Sub-rule (1) sets the two acts by which the option for safe harbour is exercised: the assessee must furnish Form No. 49, complete in all respects, to the Assessing Officer on or before the due date specified in section 263(1)(c) for furnishing the return of income for the relevant tax year, and the return for that year must be furnished on or before the date of furnishing Form No. 49.

Sub-rule (2) requires the Assessing Officer, on receipt of Form No. 49, to verify that the assessee is an eligible assessee and that the transaction is an eligible international transaction before the option is treated as validly exercised. Sub-rule (3) provides that where he doubts the valid exercise of the option, he shall refer the eligibility of the assessee or of the transaction, or both, to the Transfer Pricing Officer. Sub-rule (4) allows the Transfer Pricing Officer to require the assessee, by notice in writing, to furnish such information, documents or other evidence as he considers necessary, and the assessee must furnish them within the time specified in the notice.

Sub-rule (5) provides that where the assessee does not furnish what was required, or the Transfer Pricing Officer finds that the assessee is not an eligible assessee, or that the transaction is not an eligible international transaction, he shall by order in writing declare the option invalid, after giving the assessee a reasonable opportunity of being heard, and serve a copy on the assessee and the Assessing Officer.

Sub-rules (6) and (7) give the appeal route. The assessee may file objections against that order with the Commissioner to whom the Transfer Pricing Officer is subordinate, within fifteen days of receipt of the order; the Commissioner, after a reasonable opportunity of being heard, shall pass appropriate orders on the validity or otherwise of the option and serve copies on the assessee and the Assessing Officer.

Sub-rule (8) deals with the case where the option is held valid: the Assessing Officer proceeds to verify whether the transfer price declared for the relevant eligible international transactions accords with the circumstances specified in rule 89(2), and where it does not, he shall adopt the operating profit margin or rate of interest or commission specified in that rule.

Sub-rule (9) fixes three time limits, each running from the end of a month: no reference by the Assessing Officer after two months from the end of the month in which Form No. 49 is received; no order by the Transfer Pricing Officer after two months from the end of the month in which the reference is received; and the Commissioner's order within two months from the end of the month in which the objection is received. Sub-rule (10) supplies the consequence of inaction: if the reference is not made or the order not passed within those limits, the option for safe harbour shall be treated as valid.

Sub-rule (11) requires Form No. 49 to be furnished electronically under digital signature or through electronic verification code, verified by the person authorised to verify the return under section 265. Sub-rule (12) preserves the Assessing Officer's power to make a reference under section 166 in respect of an international transaction other than the eligible international transaction.

Why it is there

Rule 89 states the circumstances in which a declared transfer price is to be accepted, but acceptance cannot be automatic on the assessee's say-so, nor can eligibility be litigated indefinitely. This rule builds the procedure around the option: how it is exercised and by when, who tests eligibility, what happens if the assessee is found ineligible, and how quickly each officer must act. The time limits in sub-rule (9) and the deeming in sub-rule (10) are the core of it — silence from the Department is not a rejection but an acceptance.

Who it applies to

• An assessee exercising the option for safe harbour in respect of an eligible international transaction other than provision of information technology services
• The person authorised under section 265 to verify the assessee's return of income
• The Assessing Officer receiving Form No. 49 and verifying eligibility
• The Transfer Pricing Officer determining eligibility on a reference
• The Commissioner to whom the Transfer Pricing Officer is subordinate

The figures, and what each one turns on

The forms it prescribes

• Form No. 49 — exercise of the option for safe harbour, furnished electronically under digital signature or through electronic verification code and verified by the section 265 person

What this means in practice

Two filings have to be sequenced correctly, and the order matters: the return must be furnished on or before the date Form No. 49 goes in, and Form No. 49 itself must be in by the section 263(1)(c) due date, so a form filed on time after a late return does not satisfy sub-rule (1)(b). Every deadline in sub-rule (9) runs from the end of a month rather than from a date, which gives each officer more time than a plain reading of the period suggests. The reward for delay belongs to the assessee: under sub-rule (10) an option is treated as valid if the reference is not made or the order not passed in time, so no order at all is not the same as an adverse order. Winning on eligibility is not the end of the matter either — sub-rule (8) then tests the declared price against the circumstances in rule 89(2), and if it falls short the Assessing Officer adopts the margin, interest rate or commission that rule specifies. And the safe harbour covers only the eligible transaction: sub-rule (12) leaves the Assessing Officer free to make a section 166 reference on the assessee's other international transactions.

An example

A company files its return on 20 November and furnishes Form No. 49 for an eligible international transaction on 28 November, within the section 263(1)(c) due date, so sub-rule (1) is satisfied. The Assessing Officer doubts eligibility and refers the matter to the Transfer Pricing Officer on 10 January, within two months from the end of November. The Transfer Pricing Officer must pass any order declaring the option invalid by 31 March, two months from the end of January; if he does not, sub-rule (10) treats the option as valid. Had he passed the order on 5 March, the company's objections to the Commissioner would be due by 20 March, fifteen days from receipt.

Where you meet this rule

An assessee meets it when filing Form No. 49 for the year, and then in any notice from the Transfer Pricing Officer under sub-rule (4) calling for evidence of eligibility, or in an order under sub-rule (5) declaring the option invalid.

The words themselves

What people get wrong

• Filing Form No. 49 before the return. Sub-rule (1)(b) requires the return to be furnished on or before the date of furnishing Form No. 49.
• Counting the two-month limits from the date of receipt. Sub-rule (9) counts each of them from the end of the month of receipt.
• Reading departmental silence as rejection. Sub-rule (10) treats the option as valid if the reference is not made or the order not passed within the sub-rule (9) limits.
• Assuming a valid option ends the enquiry. Sub-rule (8) still tests the declared price against the circumstances in rule 89(2) and lets the Assessing Officer adopt the specified margin, interest rate or commission.
• Objecting to the Assessing Officer or waiting for the assessment. Sub-rule (6) requires objections to the Commissioner within fifteen days of receipt of the Transfer Pricing Officer's order.
• Treating the safe harbour as covering all the assessee's international transactions. Sub-rule (12) preserves a section 166 reference for transactions other than the eligible international transaction.

Read with

• Rule 89