Rule 99 of the Draft Income-tax Rules, 2026 lays down definitions for applying safe harbour rules relating to income attribution in business and profession cases. A “contract manufacturer” is defined as an Indian company producing specified electronic goods on behalf of a foreign company in a custom bonded area, which refers to a warehouse under section 65 of the Customs Act, 1962. An “eligible assessee” includes a foreign diamond mining company opting for safe harbour under rule 100, or a foreign company storing components in a custom bonded warehouse for supply to a contract manufacturer for manufacturing specified electronic goods. “Eligible business” covers sale of raw diamonds in a notified special zone and storage of components for sale to contract manufacturers. “Gross receipts” are defined separately for diamond sales and component sales, including amounts paid, payable, received, or deemed received. “Raw diamonds” must be uncut, unpolished, non-conflict diamonds with a Kimberley Process Certificate and classified under Tariff Heading 7102. “Specified electronic goods” include mobile phones, laptops, tablets, servers, ultra small form factor devices, sub-assemblies, hearables, wearables, and related accessories.
Extract of Rule No. 99 of Draft Income-tax Rules, 2026
Rule 99
Definitions for safe harbour rules for income attribution in case of income from business and profession.
For the purposes of this rule and rule 99 to 102, —
(a) “contract manufacturer” means an Indian company who produces specified electronic goods on behalf of any foreign company in a custom bonded area;
(b) “custom bonded area” shall mean warehouse as referred to in section 65 of the Customs Act, 1962;
(c) “eligible assessee” means:—
(i) a foreign company engaged in the business of diamond mining which has exercised an option for application of safe harbour rules in accordance with rule 100; or
(ii) a foreign company who stores components in a warehouse in a custom bonded area for providing them to a contract manufacturer to be used for manufacturing of specified electronic goods;
(d) “eligible business” means:—
(i) a business of selling raw diamonds in any notified special zone as referred under section 9(8)(c)(ii)(C); or
(ii) 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 of specified electronic goods;
(e) “gross receipts” means:—
(i) in a case referred to clause (a)(i), the aggregate of —
(A) the amount paid or payable to the eligible assessee or to any person on his behalf on account of sale of raw diamonds by such eligible assessee; and
(B) the amount received or deemed to be received by the eligible assessee or by any person on his behalf on account of sale of raw diamonds by such eligible assessee;
(ii) in a case referred to clause (a)(ii), the aggregate of —
(A) the amount paid or payable to the eligible assessee or to any person on his behalf on account of sale of components in a warehouse in a custom bonded area to the contract manufacturer to be used for manufacturing of specified electronic goods; and
(B) the amount received or deemed to be received by the eligible assessee or by any person on his behalf on account of sale of components in a warehouse in a custom bonded area to the contract manufacturer to be used for manufacturing of specified electronic goods;
(f) “relevant tax year” means the tax year in which the option for safe harbour is exercised;
(g) “raw diamonds” means diamonds that are, –
(i) uncut or unpolished;
(ii) unassorted;
(iii) unworked or simply sawn, cleaved or bruted;
(iv) not conflict diamonds as defined by the Kimberley Process;
(v) accompanied by Kimberley Process Certificate issued by the Kimberley Process authority in the exporting country; and
(vi) falling under Tariff Heading 7102 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975);
(h) ‘specified electronic goods’ shall mean:—
(i) mobile phones;
(ii) laptops, all-in-one personal computers and tablets;
(iii) servers and ultra small form factor (USSF);
(iv) sub-assemblies to the finished goods mentioned in clause (i) to (iii); or
(v) hearables and wearables and accessories related to the finished goods mentioned in clause (i) to (iii).
