Rule 91 of the Draft Income-tax Rules, 2026 prescribes a separate procedure for safe harbour in respect of eligible international transactions involving provision of information technology services. Once validly exercised, the safe harbour option remains in force for five consecutive tax years. The assessee must electronically furnish Form No. 49 to the Director General of Income-tax (Systems) during the first of the five tax years and up to 30 June of the succeeding financial year. Verification of eligibility of the assessee, the transaction, and the validity of the option is carried out electronically. The assessee must be informed within two months from the end of the month in which the option is exercised about acceptance or rejection, and rejection cannot occur without an opportunity to rectify defects and must include reasons. Upon acceptance, the assessee must file returns in accordance with safe harbour provisions for all five years and submit annual statements detailing eligible transactions and margins. Withdrawal is permitted but bars re-exercise until expiry of the five-year block. The Assessing Officer may refer non-eligible transactions under section 166, and procedural standards will be prescribed by the Director General of Income-tax (Systems).
Extract of Rule No. 91 of Draft Income-tax Rules, 2026
Rule 91
Procedure relating to transactions of provision of information technology services.
(1) Where option for safe harbour is exercised in respect of eligible international transaction being provision of information technology services, such option for safe harbour, once exercised validly, shall continue to remain in force for a period of five consecutive tax years;
(2) For exercising option for safe harbour, the assessee shall furnish a Form No. 49, complete in all respects, to the Director General of Income-tax (Systems) at any time during the first of the five consecutive tax years for which option for safe harbour is proposed to be exercised and upto the 30th of June of the financial year immediately succeeding the aforesaid first tax year.
(3) After furnishing of Form No. 49, verification in respect of the following shall be done electronically,–
(a) the assessee exercising the option is an eligible assessee;
(b) the transaction in respect of which the option is exercised is an eligible international transaction; and
(c) the exercise of option is valid;
(4) After verification, the assessee shall be intimated within a period of two month from the end of the month in which the option for safe harbour is exercised, about the acceptance or the rejection of the option exercised, as the case may be.
(5) The option for exercise of safe harbour shall not be rejected unless the assessee is provided an opportunity to remove defects, if any, in the application filed.
(6) Where an option for safe harbour is rejected electronically, the assessee shall be provided reasons for the same.
(7) Where an option for safe harbour is accepted, the assessee shall furnish return of income in accordance with the safe harbour provisions for each of the five consecutive tax years on or before the due date specified in section 263(1)(b).
(8) The option shall not remain in force in respect of any tax year, if the assessee withdraws the option for safe harbour, by furnishing a declaration to that effect.
(9) Where an assessee withdraws the option for safe harbour, he shall not be eligible to again exercise the option for safe harbour upto the period of expiry of five consecutive tax years referred to in sub-rule (1).
(10) The assessee shall, in respect of each of the four consecutive tax years following the first tax year, furnish a statement before furnishing return of income of that tax year, providing details of eligible transactions, their quantum and profit margins.
(11) The Assessing Officer may make a reference under section 166 in respect of international transaction other than the eligible international transaction.
(12) Form No. 49 shall be furnished electronically either under digital signature or through electronic verification code and shall be verified by the person who is authorised to verify the return of income of the assessee under section 265.
(13) The Director General of Income-tax (Systems) shall, with the approval of the Board, lay down the data structure, standards, format and procedure of furnishing and verification of such Forms, statements, order, declaration, including any modification, if required.
