Rule 100: Safe harbour for business income attribution
Rule 100 sets the declared-income conditions for the two eligible businesses where the Rule 101 safe harbour option is valid. Before applying the 4% or 2% minimum margins, assess the separate conditional Act exemptions introduced from 1 October 2026 for the specified diamond-sale and component-storage income.
Official notified Income-tax Rules, 2026Need advice on Rule 100?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
On this page
Bare law
Rule 100 - Safe harbour for income attribution in case of income from business and profession
(1) The income-tax authorities shall accept the option for safe harbour exercised by an eligible assessee in any relevant tax year under rule 101, where the income declared by such assessee from an eligible business is in accordance with the circumstances as specified under sub-rule (2), unless such safe harbour is declared invalid under the provisions of rule 101(3).
(2) In respect of the eligible business mentioned in column B of the following Table, the circumstances referred to in sub-rule (1) shall be as specified in column C thereof:
Table Sl. No. (A) Eligible business (B) Circumstances (C) 1. Selling of raw diamonds. The profits and gains of the eligible business chargeable to tax under the head ‘Profits and gains of business or profession’ shall be 4% or more of the gross receipts from such business. 2. The business activity of storage of components in a warehouse in a custom bonded area for sale to a contract manufacturer. The profits and gains of the eligible business chargeable to tax under the head ‘Profits and gains of business or profession’ shall be 2% or more of the gross receipts from such business. (3) Where the eligible assessee has exercised the option for safe harbour under rule 101 in respect of the eligible business in any relevant tax year and such option is not declared invalid under the said rule,— (a) any deduction allowable under the provisions of sections 28 to 34, 44 to 49, 51, 52, Schedule IX and Schedule X shall be deemed to have been already given full effect to and no further deduction under those sections or Schedules shall be allowed; (b) the written down value of any asset of such business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for such tax year; (c) no set off of unabsorbed depreciation under section 33(11) or carried forward loss under section 112(1) shall be allowed to such assessee; and (d) no set off of loss from other business under section 108(1) or other head under section 109 shall be allowed to such assessee for income chargeable to tax under the head ‘Profits and gains of business or profession’ in respect of such business.
(4) The provisions of sections 171 and 172 shall apply in respect of an international transaction or specified domestic transaction, if the eligible assessee enters into such transaction while carrying on the eligible business.
(5) For the purposes of this rule, the expressions, ‘international transaction’ and ‘specified domestic transaction’ shall have the meanings respectively assigned to them in sections 163 and 164.
Introduction
The two table percentages are minimum profits and gains as a share of gross receipts, not income-tax rates. The option must be exercised for the relevant tax year under Rule 101 and must not be declared invalid.
Rule breakdown
Check the October 2026 exemptions before applying a margin
From 1 October 2026, Schedule IV entries 13F and 13G of the Income-tax Act provide separate conditional exemptions for the specified rough-diamond sale income and component-storage income available on sale of components. Check those current Act provisions before choosing this income-attribution safe harbour. The new exemptions do not amend the quoted Rules 99–102 or automatically make every diamond or warehouse receipt exempt.
The percentages below are safe harbour profit margins, not tax rates or a rule that every receipt must be taxed. Determine whether the relevant income satisfies Schedule IV entry 13F or 13G, including the taxpayer category, business and goods conditions, effective date and prescribed information, before deciding the computation and option treatment.
Both new entries are effective from 1 October 2026 and state availability up to the tax year ending 31 March 2041, subject to their conditions. Keep the effective date, receipt or transaction facts and required information under review. Form 49 is a safe harbour option form; do not assume it also satisfies the separate exemption’s prescribed-information requirement.
Eligibility and margin calculation
After assessing the current Act treatment, match an income-attribution safe harbour claim to the appropriate table business. Where this optional framework applies, compare declared profits with the defined gross receipts and the corresponding 4% or 2% minimum.
Exercise the Rule 101 option
The assessee must follow Rule 101 for the relevant tax year. Rule 100(1) makes acceptance conditional on the option not being declared invalid under Rule 101(3).
Deductions, depreciation and losses
Sub-rule (3) treats the listed deductions as already given full effect, specifies written-down-value treatment and limits the listed loss and unabsorbed-depreciation set-offs for the eligible-business income.
Other transaction rules continue
Sections 171 and 172 continue to apply if the assessee enters an international or specified domestic transaction while carrying on the eligible business.
Key takeaways
Current exemption check first
Schedule IV entries 13F and 13G provide separate conditional exemptions from 1 October 2026; they do not change this rule’s quoted text.
Two eligible businesses
The table covers raw-diamond sales and bonded-area storage of components for sale to a contract manufacturer.
Minimum profit margins
The respective profit thresholds are 4% and 2% of gross receipts from the eligible business.
Valid option required
Rule 101 governs the option. A declaration is not accepted through this safe harbour if the option is declared invalid.
Practical checklist
- Check current Schedule IV entries 13F and 13G, their effective date and prescribed-information conditions before choosing safe harbour.
- Keep separate gross-receipt and profit workings for the eligible business.
- Verify the Rule 101 option and any invalidity order.
- Review sub-rule (3) before claiming deductions or setting off losses.
FAQs
Are 4% and 2% tax rates?
No. They are minimum profits and gains as a percentage of gross receipts for the two eligible businesses.
Can the listed deductions be claimed again?
No. With a valid option, sub-rule (3)(a) treats them as already given full effect and disallows another deduction under the listed provisions.
Does the October 2026 amendment make every diamond or component-storage receipt exempt?
No. The separate Schedule IV exemptions have defined taxpayer, transaction, goods, information and timing conditions. Assess them independently of the unchanged safe harbour rules.