Rule 10 of the Draft Income-tax Rules, 2026 defines key terms for the purposes of Rule 11 and Rule 12. It elaborates on the meaning of “accountant,” specifying eligibility criteria such as professional experience, minimum annual receipts, and conditions for individual practitioners, valuers, or partners in accountancy or valuation entities. It also includes foreign professionals recognized for cost certification in their respective countries, subject to specified experience, revenue, and international presence requirements. The rule defines “connected person” as per section 184(5) and clarifies that “right of management or control” includes the authority to appoint a majority of directors or influence policy decisions, directly or indirectly. It further defines “telegraphic transfer buying rate,” “observable price” of listed shares based on specified averaging methods, and “book value of liabilities,” excluding equity capital and related reserves. The term “specified date” carries the meaning assigned in section 9(10)(d). Definitions are also provided for “merchant banker” and “recognised stock exchange” as per rule 56. The rule clarifies the meaning of “balance sheet” for Indian and foreign entities, including interim or certified statements where final accounts are pending, and defines “foreign company or entity” as one registered or incorporated outside India.
Extract of Rule No. 10 of Draft Income-tax Rules, 2026
Rule 10
Definition of terms for rule 11 and rule 12.
(1) For the purposes of rule 11 and rule 12
(a) “accountant” __
(A) means an accountant referred to in section 515(3)(b) of the Act, who fulfils the following conditions, namely: —
(i) if he is pursuing the profession of accountancy individually or is a valuer then-
(a) he has professional experience of not less than ten years; and
(b) his annual receipt in the year preceding the year in which cost certification is undertaken, from the exercise of profession, exceeds ₹ 50 lakhs;
(ii) if he is a member or partner in any entity engaged in rendering accountancy or valuation services then, the annual receipt of the entity in the year preceding the year in which cost certification is undertaken exceeds ₹ 3 crores;
(B) includes any person recognised for undertaking cost certification by the Government of the country where the associated enterprise is registered or incorporated or any of its agencies, who fulfils the following conditions, namely: —
(i) the condition referred to in (a)(A)(i) and (ii);
(ii) if he is a member or partner in any entity engaged in rendering accountancy or valuation services then, the entity or its affiliates have presence in more than two countries;
(b) “connected person” shall have the meaning as assigned to it in section 184(5);
(c) “right of management or control” shall include the right to appoint majority of the directors or to control the management or policy decision exercisable by a person or persons acting individually or together, directly or indirectly, including by virtue of shareholding or management rights or shareholders agreements or voting agreements or in any other manner;
(d) “telegraphic transfer buying rate” shall have the meaning as assigned to it in rule 207;
(e) “observable price” in respect of a share quoted on a stock exchange shall be the higher of the following: —
(i) the average of the weekly high and low of the closing prices of the shares quoted on the said stock exchange during the six months period preceding the specified date; or
(ii) the average of the weekly high and low of the closing price of the shares quoted on the said stock exchange during the two weeks preceding the specified date;
(f) “book value of the liabilities” means the value of liabilities as shown in the balance-sheet of the company or the entity, as the case may be, excluding the paid-up capital in respect of equity shares or members’ interest and the general reserves and surplus and security premium related to the paid-up capital;
(g) “specified date” shall have the meaning as assigned to it in section 9(10)(d);
(h) terms “merchant banker” and “recognised stock exchange” shall have the meaning as assigned to them in rule 56;
(i) “balance sheet”, —
(i) in relation to an Indian company, means the balance-sheet of such company (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date which has been audited under the laws relating to companies in force; and
(ii) in any other case, it means the balance-sheet of the company or the entity (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date and submitted to the relevant authority outside India under the laws in force of the country in which the foreign company or the entity is registered or incorporated:
(iii) Where finalization of accounts is pending as on specified date for purposes of sub-clauses (i) and (ii), it means an interim balance-sheet drawn up as on the specified date and approved by the board of directors of the company or an equivalent body in case of any other entity:
(iv) Where the specified date is the date referred to in section 9(10)(d) (iii), it means the balance sheet as drawn up on the specified date and certified by an accountant;
(j) “foreign company or entity” means a company or entity registered or incorporated outside India.
