RULE 89 INCOME-TAX RULES 2026 Safe harbour for eligible international transactions.

By | April 1, 2026

RULE 89 INCOME-TAX RULES 2026

Safe harbour for eligible international transactions.

89. (1) The transfer price de-clared by an eligible assessee in respect of an eligible international transaction for a tax year shall be accepted by the income-tax authorities, if—

(a)the option exercised by the said assessee is not held to be invalid under rule 90; and
(b)it is in accordance with the circumstances as specified in sub-rule (2).

(2) The circumstances referred to in sub-rule (1) in respect of the eligible international transaction specified in column B of the following Table shall be as specified in column C thereof:

TABLE

Sl. No.Eligible International TransactionCircumstances
ABC
1.Provision of information technology services.The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is not less than 15.5%, where the aggregate operating revenue of such transaction entered into during the tax year does not exceed a sum of two thousand crore rupees.
2.Advancing of intra-group loans where the amount of loan is denominated in Indian Rupees (rupees).The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the oneyear marginal cost of funds lending rate of State Bank of India as on the 1st April of the relevant tax year plus—

(i)175 basis points, where the associated enterprise has credit rating between AAA to A or its equivalent; or
(ii)325 basis points, where the associated enterprise has credit rating of BBB–, BBB or BBB+ or its equivalent; or
(iii)475 basis points, where the associated enterprise has credit rating between BB to B or its equivalent; or
(iv)625 basis points, where the associated enterprise has credit rating between C to D or its equivalent; or
(v)425 basis points, where credit rating of the associated enterprise is not available and the amount of loan advanced to the associated enterprise including loans to all associated enterprises in Indian Rupees does not exceed a sum of one hundred crore rupees in the aggregate as on the 31st March of the relevant tax year.
3.Advancing of intra-group loans where the amount of loan is denominated in foreign currency.The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the reference rate of the relevant foreign currency as on the 30th September of the relevant tax year plus—

(a)if amount of loan advanced to the associated enterprise including loans to all associated enterprises does not exceed a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on 31st March of the relevant tax year, —
(i)150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or
(ii)300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or
(iii)400 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B-, C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available;
(b)if amount of loan advanced to the associated enterprise including loans to all associated enterprises exceeds a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on the 31st March of the relevant tax year, —
(i)150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or
(ii)300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or
(iii)450 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B- or equivalent; or
(iv)600 basis points, where the associated enterprise has credit rating of C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available.
4.Providing corporate guarantee.The commission or fee declared in relation to the eligible international transaction entered into during the tax year is at the rate not less than 1% per annum on the amount guaranteed.
5.Provision of contract research and development services, wholly or partly, relating to generic pharmaceutical drugs.The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense incurred is not less than 24%, where the aggregate operating revenue of such transaction does not exceed a sum of three hundred crore rupees.
6.Manufacture and export of core auto components.The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 12%.
7.Manufacture and export of non-core auto components.The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 8.5%.
8.Receipt of low value-adding intra-group services.The aggregate amount of the low value adding intra-group services during the tax year, including a mark­up not exceeding 5%, does not exceed a sum of ten crore rupees, and the method of cost pooling, the exclusion of shareholder costs and duplicate costs from the cost pool and the reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas associated enterprise, is certified by an accountant.
9.Provision of the data centre services.The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 15%.

(3) For the purposes of this rule, —

(a)“reference rate” means, —
(i)for US dollar, 6-month Term Secured Overnight Financing Rate (SOFR), currently administered by Chicago Mercantile Exchange (CME), as increased by 45 basis points;
(ii)for Euro, 6-month Euro Inter Bank Offered Rate (EURIBOR), currently administered by European Money Markets Institute;
(iii)for UK Pound Sterling, 6-month Term Sterling Overnight Index Average (SONIA), currently administered by ICE Benchmark Administration or Refinitiv, as increased by 30 basis points;
(iv)for Japanese Yen, 6-month Tokyo Term Risk Free Rate (TORF), currently benchmarked by QUICK Benchmarks Inc, as increased by 10 basis points;
(v)for Australian dollar, 6-month Bank Bill Swap Rates (BBSW) currently administered by Australian Securities Exchange; and
(vi)for Singapore dollar, 6-month Compounded Singapore Overnight Rate Average (SORA), currently administered by Monetary Authority of Singapore, as increased by 45 basis points;
(b)“credit rating” means the credit rating assigned to the associated enterprise by a Securities and Exchange Board of India registered and Reserve Bank of India accredited credit rating agency, which is applicable for the relevant tax year, so however that—
(i)where the associated enterprise has only one credit rating, then such rating shall be taken as its credit rating; or
(ii)where the associated enterprise has a credit rating from more than one such credit rating agency, then the least of such ratings shall be taken as its credit rating.

(4) The provisions of sub-rules (1) and (2) shall apply for a block period of three tax years commencing from the tax year 2026-2027 and shall continue to apply for block periods subsequent to the aforesaid block period, unless modified.

(5) No comparability adjustment and allowance under section 165(3)(a)(ii) shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and (2).

(6) The provisions of sections 171 and 172 in respect of an international transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction.