Rule 99 — Definitions for safe harbour rules for income attribution in case of income from business and profession. Made under s.9 of the Income-tax Act, 2025.
Rule 99 gives effect to Section 9 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Rule 99 is the definition rule for itself and rules 100 to 102, the safe harbour rules for attributing income from business and profession. It defines nine expressions.
"Contract manufacturer" is an Indian company which produces specified electronic goods on behalf of any foreign company in a custom bonded area, and "custom bonded area" is a warehouse as referred to in section 65 of the Customs Act, 1962.
"Eligible assessee" has two limbs: a foreign company engaged in the business of diamond mining which has exercised an option for application of the safe harbour rules in accordance with rule 100, and a foreign company which stores components in a warehouse in a custom bonded area for providing them to a contract manufacturer to be used for manufacturing specified electronic goods.
"Eligible business" matches those two limbs: the business of selling raw diamonds in any notified special zone as referred to under section 9(9)(c)(ii)(C), and the business activity of storage of components in a warehouse in a custom bonded area for sale to a contract manufacturer to be used for manufacturing specified electronic goods.
"Gross receipts" is defined separately for each limb, and in each case as an aggregate of two amounts: the amount paid or payable to the eligible assessee or to any person on his behalf on account of the relevant sale, and the amount received or deemed to be received by the eligible assessee or by any person on his behalf on account of that sale. For the diamond limb the sale is of raw diamonds; for the electronics limb it is of components in a warehouse in a custom bonded area to the contract manufacturer to be used for manufacturing specified electronic goods.
"Raw diamonds" is a six-condition definition, all of which must hold: the diamonds are uncut or unpolished; unassorted; unworked or simply sawn, cleaved or bruted; not conflict diamonds as defined by the Kimberley Process; accompanied by a Kimberley Process Certificate issued by the Kimberley Process authority in the exporting country; and falling under Tariff Heading 7102 of the First Schedule to the Customs Tariff Act, 1975.
"Relevant tax year" is the tax year in which the option for safe harbour is exercised.
"Specified electronic goods" means mobile phones; laptops, all-in-one personal computers and tablets; servers and ultra small form factor; sub-assemblies to those finished goods; and hearables and wearables and accessories related to those finished goods.
The safe harbour for attributing income to a non-resident's Indian activity can only be operated if the classes of person, business and receipt it covers are drawn tightly, because the concession is given without a transaction-by-transaction examination. Rule 99 draws those lines once, so rules 100 to 102 can work with settled terms rather than repeating them. The detail in "raw diamonds" and "gross receipts" is doing the boundary work.
Two quite different fact patterns share one safe harbour, and every definition here has to be read for the limb in issue. On the diamond side, the exercise of the option under rule 100 is built into the definition of eligible assessee itself, so a diamond mining company that has not exercised the option is not an eligible assessee at all; the electronics limb carries no such requirement in its own words. "Raw diamonds" is cumulative, not illustrative: a stone that is uncut and unpolished but has been assorted, or that arrives without a Kimberley Process Certificate from the exporting country, falls outside the definition and takes the receipt with it. "Gross receipts" is deliberately wider than cash collected — it aggregates amounts paid or payable and amounts received or deemed to be received, and it counts amounts routed to or through any person on the assessee's behalf. "Relevant tax year" is anchored to the year the option is exercised, not to the year of the receipt.
A foreign company mines diamonds and sells them in a notified special zone referred to under section 9(9)(c)(ii)(C). One consignment is uncut, unpolished, unassorted, simply sawn, not conflict diamonds, and comes with a Kimberley Process Certificate from the exporting country under Tariff Heading 7102; it is within the definition of raw diamonds. A second consignment has been assorted before shipment, so it fails condition (ii) and its sale proceeds are not gross receipts of the eligible business. If the company has not exercised the option under rule 100, it is not an eligible assessee for either consignment.
A reader meets it while working through rules 100 to 102, where every operative term used for the safe harbour computation is defined here rather than there.
"contract manufacturer" means an Indian company who produces specified electronic goods on behalf of any foreign company in a custom bonded area
"relevant tax year" means the tax year in which the option for safe harbour is exercised