Rule 91 — Procedure relating to transactions of provision of information technology services. Made under s.166, s.263, s.265 of the Income-tax Act, 2025.
Rule 91 gives effect to Section 166, Section 263 and Section 265 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-rule (1) fixes the term of the safe harbour where the option is exercised for the eligible international transaction of provision of information technology services: once validly exercised, the option continues to remain in force for a period of five consecutive tax years. Sub-rule (2) states when the size test is applied: the threshold of two thousand crore rupees of aggregate operating revenue is tested for the first of those five years.
Sub-rules (3) to (7) run the application. The assessee furnishes Form No. 49, complete in all respects, to the Director General of Income-tax (Systems) for the first of the five years, on or before the due date of furnishing the return of income specified in section 263(1)(c) for that first year. Verification is then done electronically on three matters: that the assessee is an eligible assessee, that the transaction is an eligible international transaction, and that the exercise of option is valid. The assessee is intimated of acceptance or rejection within two months from the end of the month in which the option was exercised. The option is not to be rejected without giving the assessee an opportunity to remove defects in the application, and where it is rejected electronically the assessee is to be given reasons.
Sub-rule (8) requires an assessee whose option is accepted to furnish the return of income in accordance with the safe harbour provisions for each of the five years, on or before the due date in section 263(1)(c). Sub-rules (9) to (12) govern withdrawal: the option ceases for a tax year if the assessee withdraws it by furnishing a declaration; the withdrawal cannot be made after the expiry of six months from the end of the first tax year; withdrawal ends the option for the year of withdrawal and for subsequent years; and an assessee who withdraws cannot again exercise the option up to the expiry of the five consecutive tax years.
Sub-rule (13) requires a statement for each of the four consecutive tax years following the first, on or before the due date of furnishing the return for that year under section 263(1)(c), giving details of eligible transactions, their quantum and profit margins. Sub-rule (14) 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. Sub-rules (15) and (16) require Form No. 49 to be furnished electronically under digital signature or through electronic verification code, certified by the chief executive officer or chairman and managing director of the assessee, and verified by the person authorised to verify the return of income under section 265. Sub-rule (17) empowers the Director General of Income-tax (Systems), with the approval of the Board, to lay down the data structure, standards, format and procedure for furnishing and verifying those Forms, statements, order and declaration, including any modification.
A safe harbour only works if both sides know how long it lasts and when eligibility is tested, and the procedure for exercising it has to be fixed in advance. This rule locks the option for five consecutive tax years, tests the two thousand crore rupee revenue threshold once at the front end, and puts the whole exercise on an electronic footing with fixed dates and a defined intimation period. The withdrawal provisions stop an assessee from moving in and out of the safe harbour as the year's results become clear.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Period for which a validly exercised option remains in force | Five consecutive tax years | Option for safe harbour exercised in respect of provision of information technology services | Rule 91(1) |
| Aggregate operating revenue threshold | Two thousand crore rupees | Tested for the first of the five consecutive tax years | Rule 91(2) |
| Time for furnishing Form No. 49 | On or before the due date of furnishing the return of income specified in section 263(1)(c) | For the first of the five consecutive tax years for which the option is proposed to be exercised | Rule 91(3) |
| Time for intimating acceptance or rejection of the option | Within two months from the end of the month in which the option is exercised | After electronic verification of eligibility and validity | Rule 91(5) |
| Last date for withdrawing the option | Not after the expiry of six months from the end of the first tax year | Withdrawal by furnishing a declaration under sub-rule (9) | Rule 91(10) |
| Bar on re-exercising the option after withdrawal | Up to the expiry of the five consecutive tax years | Where the assessee has withdrawn the option for safe harbour | Rule 91(12) |
| Years for which the annual statement of eligible transactions is due | Each of the four consecutive tax years following the first tax year | Filed on or before the due date of furnishing the return of income for that year under section 263(1)(c) | Rule 91(13) |
The two thousand crore rupee revenue threshold is tested once, for the first of the five years, so crossing it later in the block does not by itself end the safe harbour. What does end it is withdrawal, and withdrawal is a one-way door: sub-rule (11) ends the option for that year and for subsequent years, and sub-rule (12) bars re-entry up to the expiry of the five consecutive tax years. The withdrawal window itself closes six months from the end of the first tax year, so a decision taken in the light of a later year's results is out of time. Filing Form No. 49 is not the end of the compliance: sub-rule (8) requires the return for each of the five years to be filed in accordance with the safe harbour provisions and by the section 263(1)(c) due date, and sub-rule (13) requires a separate statement of eligible transactions, quantum and margins for each of the four following years. The safe harbour does not shut out scrutiny of anything else; sub-rule (14) leaves the Assessing Officer free to make a section 166 reference on any other international transaction.
A company providing information technology services has aggregate operating revenue of Rs 1,700 crore in the first of the five years and exercises the option by filing Form No. 49 by the section 263(1)(c) due date for that year. The threshold in sub-rule (2) is tested for that first year alone, so revenue rising to Rs 2,400 crore in year three does not disturb the option. If the company wanted out, sub-rule (10) required the declaration within six months from the end of the first tax year, and under sub-rule (12) it could not exercise the option again up to the expiry of the five years.
You meet it as Form No. 49 filed with the Director General of Income-tax (Systems), the electronic intimation of acceptance or rejection that follows, and the annual statement of eligible transactions filed with each of the next four returns.
such option for safe harbour, once exercised validly, shall continue to remain in force for a period of five consecutive tax years
the threshold of two thousand crore rupees of the aggregate operating revenue shall be tested for the first of the five consecutive tax years
The withdrawal of option referred to in sub-rule (9) shall not be made after the expiry of six months from the end of the first tax year.