Section 167: power of the Board to make safe harbour rules

Introduction

Section 167 authorises Board-made safe harbour rules for specified deemed Indian income and arm's-length price determination. Within qualifying circumstances, tax authorities accept the declared transfer price or income.

Key takeaways

Scope and power

Subsection (1) places income under Section 9(2) and arm's length price under Sections 165 or 166 within the safe harbour framework. Subsection (2) allows the Board to make the rules.

Statutory meaning

Under subsection (3), safe harbour means circumstances in which income-tax authorities accept the transfer price or Section 9(2) deemed income declared by the assessee.

Rule eligibility is essential

The section enables safe harbour, but it does not itself provide numerical margins or transaction thresholds. Test the relevant Board rules for the tax year before relying on acceptance.

When this provision applies

Identify which determination is involved: the income referred to in Section 9(2), or an arm’s length price under Section 165 or 166. These are the statutory categories; an unrelated dispute is not brought within safe harbour merely by using that label.

Match the facts with the currently applicable Board rules for the relevant year. Eligibility, covered transactions or income, computation conditions and procedural requirements must come from those rules, not from a margin or threshold assumed to be stated in Section 167.

Limits and procedural safeguards

The statutory definition concerns acceptance of the declared transfer price or specified deemed income in the qualifying circumstances. It is not a general promise that every tax item in the return will be accepted or that all other obligations disappear.

A similar business model or a result that appears commercially reasonable does not establish safe-harbour eligibility. Check the precise category and conditions and retain evidence for each; do not substitute a rule from another year without checking its applicability.

Step-by-step review

1. Identify the Section 9(2), 165 or 166 determination under consideration.

2. Locate the applicable safe-harbour rule and its period of operation.

3. Map the taxpayer, transaction or income and computation to each condition in that rule.

4. Complete the applicable procedural steps and preserve evidence supporting the declared price or income.

Hypothetical example

Hypothetical illustration: a business seeks safe-harbour treatment for a transfer price because another group company uses it. Section 167 alone does not establish eligibility. The business must check whether its own transaction and circumstances fall within the relevant rules and meet their computation and procedural conditions.

Records to prepare

The relevant transaction or income category and tax year.

The applicable official safe-harbour rule and a condition-by-condition analysis.

Computation, supporting records and evidence of the procedural steps actually completed.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 167 and related provisions

Practical checklist

Glossary

Safe harbour

Defined circumstances in which authorities accept the taxpayer's declared transfer price or specified deemed income.

Arm's length price

The price determined under the transfer-pricing provisions for a qualifying transaction.

Rule eligibility

Satisfaction of the particular circumstances and conditions specified in the applicable safe-harbour rules.

Frequently asked questions