Rules 2026

Rule 96 of the Income-tax Rules, 2026

Rule 96 — Eligible specified domestic transaction for safe harbour.

Where this rule sits

What this rule does

The rule defines an "eligible specified domestic transaction" as a specified domestic transaction undertaken by an eligible assessee and comprising the supply of electricity, the transmission of electricity, the wheeling of electricity, or the purchase of milk or milk products by a co-operative society from its members.

Why it is there

The safe harbour scheme for specified domestic transactions accepts a declared transfer price without examination, but only for transactions the rules name. This rule names them. It is the gate between the eligible assessee identified in rule 95 and the circumstances and margins in rule 97 — a transaction outside these four descriptions never reaches the safe harbour, whoever undertakes it.

Who it applies to

An eligible assessee undertaking a specified domestic transaction in the supply, transmission or wheeling of electricity
A co-operative society purchasing milk or milk products from its members

What this means in practice

Both limbs of the definition must hold: the transaction must be one of the four listed, and it must be undertaken by an eligible assessee as the safe harbour rules identify that person. The electricity limbs are separate — supply, transmission and wheeling are listed as three distinct activities — and the milk limb is confined to a purchase by a co-operative society from its own members, so a purchase from a non-member or by a body that is not a co-operative society is outside it. Being an eligible specified domestic transaction does not by itself get the declared price accepted; it only makes the transaction one on which the safe harbour circumstances can operate.

An example

Illustrative only, and invented for this page. The figures are chosen to show the requirement biting, not taken from any real matter.

A co-operative society buys milk from its member producers and also buys milk from a neighbouring society that is not a member. Only the first purchase answers clause (d) and can be an eligible specified domestic transaction; the second falls outside the definition and remains open to ordinary transfer pricing examination.

Where you meet this rule

In the option exercised for safe harbour in respect of a specified domestic transaction, and in the transfer pricing documentation where the transaction has to be shown to fall in one of the four descriptions.

The words themselves

An "eligible specified domestic transaction" means a specified domestic transaction undertaken by an eligible assessee and which comprises of:

Rule 96, Income-tax Rules, 2026.

purchase of milk or milk products by a co-operative society from its members

Rule 96(d), Income-tax Rules, 2026.

What people get wrong

Treating any specified domestic transaction as eligible. The rule limits eligibility to the four descriptions in clauses (a) to (d).
Overlooking the eligible assessee requirement. The transaction must be undertaken by an eligible assessee as well as fall within one of the four clauses.
Reading clause (d) as covering purchases from anyone. It runs only to a purchase by a co-operative society from its members.
Assuming eligibility settles the price. Eligibility only opens the door; the circumstances for acceptance of the declared transfer price are set out in rule 97.

Read with

What this page does not tell you. It does not reproduce the rule. Everything above was written from the rule’s own text as the Income Tax Department publishes it — the text is here. A rule is subordinate legislation: it prescribes the method, the form or the period, and it cannot enlarge the charge the section imposes. Where a figure matters, read the sub-rule it comes from.