Rule 88: Eligible international safe-harbour transactions
Rule 88 lists the international transactions that can qualify for the safe-harbour framework. The transaction must be between an eligible assessee and its associated enterprise, with at least one of them necessarily non-resident.
Official notified Income-tax Rules, 2026Need advice on Rule 88?
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Bare law
Rule 88 - Eligible international transactions for safe harbour
An ―eligible international transaction‖ means an international transaction between the eligible assessee and its associated enterprise, one of which is necessarily a non-resident, and which comprises of — (a) provision of information technology services consisting of any one or more of the following: — (i) provision of software development services; or (ii) provision of information technology enabled services; or (iii) provision of knowledge process outsourcing services; or (iv) provision of contract research and development services wholly or partly relating to software development; or (b) advance of intra-group loan; or (c) provision of corporate guarantee, where the amount guaranteed, — (i) does not exceed one hundred crore rupees; or (ii) exceeds one hundred crore rupees, and the credit rating of the associated enterprise, done by an agency registered with the Securities and Exchange Board of India, is of the adequate to highest safety; or (d) provision of contract research and development services, wholly or partly, relating to generic pharmaceutical drugs; or (e) manufacture and export of core auto components; or (f) manufacture and export of non-core auto components; or (g) receipt of low value-adding intra-group services from one or more members of its group; or (h) provision of the data centre services.
Rule breakdown
Identify the parties before the transaction category
The opening test requires an eligible assessee, an associated enterprise and the specified non-resident connection. Read the eligible-assessee conditions in Rule 87 and the definitions in Rule 86.
An ordinary unrelated-party sale does not become an eligible transaction merely because it involves a listed service.
IT services and pharmaceutical research
The list covers software development, IT-enabled services, KPO and contract R&D wholly or partly relating to software. It separately includes contract R&D wholly or partly relating to generic pharmaceutical drugs.
Classify the actual services using the detailed definitions. Similar commercial labels can fall into different categories or exclusions.
Intra-group loans and corporate guarantees
Intra-group loans are included subject to the definition. For a corporate guarantee not exceeding ₹100 crore, clause (c)(i) is the relevant amount limb.
Above ₹100 crore, clause (c)(ii) requires the associated enterprise’s credit rating from a SEBI-registered agency to be in the adequate-to-highest-safety range. This is an additional condition, not a blanket prohibition of larger guarantees.
Manufacturing, group services and data centres
The remaining categories are manufacture and export of core or non-core auto components, receipt of low value-adding intra-group services, and provision of data-centre services.
For each category, retain evidence of the activity, value and parties. A qualifying category does not by itself establish the required margin or complete the option procedure.
Practical eligibility matrix
Prepare a transaction-by-transaction matrix showing the parties, residence, definition, Rule 87 status, Rule 88 category, relevant amounts and any rating evidence.
Then apply the appropriate Rule 89 conditions and the applicable option procedure. Record exclusions as carefully as included transactions.
Key takeaways
At least one non-resident party
The opening party test applies to every listed transaction.
Larger guarantees have a rating condition
The ₹100 crore boundary distinguishes the two limbs.
Definitions still apply
A category label alone does not establish eligibility.
Practical checklist
- Verify associated-enterprise and residence status.
- Match the actual transaction to its defined category.
- Keep rating evidence for guarantees above the stated threshold.
Avoid
- Do not equate an eligible category with automatic price acceptance.
- Do not ignore the definition’s exclusions.
FAQs
Are guarantees above ₹100 crore automatically excluded?
No. They require the specified associated-enterprise credit rating by a SEBI-registered agency in the adequate-to-highest-safety range, together with the other framework conditions.
Does the credit-rating limb start at exactly ₹100 crore?
Clause (c)(i) covers amounts not exceeding ₹100 crore; clause (c)(ii) covers amounts exceeding it.
Does inclusion here mean the declared price is automatically accepted?
No. The applicable safe-harbour conditions and valid option must also be satisfied.
Glossary
- Eligible international transaction
- A transaction satisfying Rule 88’s parties and listed-category requirements.
- Credit-rating condition
- The additional condition in clause (c)(ii) for a guarantee exceeding ₹100 crore.