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The Draft Income-tax Rules, 2026 have proposed a comprehensive overhaul of India's transfer pricing safe harbour framework. Rule 86 plays a foundational role in this revamp by clearly defining critical terms that apply to safe harbour rules for international transactions under Rules 87 to 93. By st
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FAQ :
Rule 86 is designed to define critical terms for India's transfer pricing safe harbour framework, aiming to reduce ambiguity, minimise litigation, and provide certainty for multinational enterprises engaging in international transactions.
An individual accountant must have at least 10 years of experience and earn over Rs 50 lakh in annual professional receipts. For firms, annual receipts must exceed Rs 3 crore. Foreign professionals must meet similar thresholds and have a firm presence in over two countries.
Rule 86 defines contract R&D services to include advanced activities like algorithm development, AI, and experimental development to bridge technology gaps, but explicitly excludes routine activities like basic debugging.
Rule 86 distinguishes between core auto components (engines, transmissions, batteries for EVs) and non-core auto components, which is crucial for determining safe harbour margins in this sector.
Only explicit corporate guarantees provided by an Indian company to its wholly owned non-resident subsidiary qualify. Letters of comfort, implicit guarantees, and performance guarantees are excluded.
Rule 86 defines data centres as physical infrastructure providers and expressly excludes data hosting services from the definition of data centre services.
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