Rule 89Published

Rule 89: International safe-harbour margins and rates

Rule 89 states the pricing conditions for eligible international transactions. Each category has its own margin, rate or cost condition, and some have transaction-revenue or aggregate-loan limits. A valid option and the wider eligibility requirements remain necessary.

Official notified Income-tax Rules, 2026

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On this page

Bare law
IT, research, manufacturing and data-centre margins
INR intra-group loan spreads
Foreign-currency loans: aggregate size changes the grid
Use the defined reference rate and rating
Guarantees and low value-adding service receipts
Block periods and continuing documentation
Illustrative margin and spread calculations
Key takeaways
Practical checklist
FAQs
Glossary
Official sources

Bare law

Rule 89 - Safe harbour for eligible international transactions
(1) The transfer price declared by an eligible assessee in respect of an eligible international transaction for a tax year shall be accepted by the income-tax authorities, if — (a) the option exercised by the said assessee is not held to be invalid under rule 90; and (b) it is in accordance with the circumstances as specified in sub-rule (2).
(2) The circumstances referred to in sub-rule (1) in respect of the eligible international transaction specified in column B of the following Table shall be as specified in column C thereof:
Sl. No. (A) Eligible International Transaction (B) Circumstances (C)
1. Provision of information technology services. The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is not less than 15.5%, where the aggregate operating revenue of such transaction entered into during the tax year does not exceed a sum of two thousand crore rupees.
2. Advancing of intra-group loans where the amount of loan is denominated in Indian Rupees (rupees). The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the one-year marginal cost of funds lending rate of State Bank of India as on the 1st April of the relevant tax year plus — (i) 175 basis points, where the associated enterprise has credit rating between AAA to A or its equivalent; or (ii) 325 basis points, where the associated enterprise has credit rating of BBB-, BBB or BBB+ or its equivalent; or (iii) 475 basis points, where the associated enterprise has credit rating between BB to B or its equivalent; or (iv) 625 basis points, where the associated enterprise has credit rating between C to D or its equivalent; or (v) 425 basis points, where credit rating of the associated enterprise is not available and the amount of loan advanced to the associated enterprise including loans to all associated enterprises in Indian Rupees does not exceed a sum of one hundred crore rupees in the aggregate as on the 31st March of the relevant tax year.
3. Advancing of intra-group loans where the amount of loan is denominated in foreign currency. The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the reference rate of the relevant foreign currency as on the 30th September of the relevant tax year plus — (a) if amount of loan advanced to the associated enterprise including loans to all associated enterprises does not exceed a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on 31st March of the relevant tax year, — (i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or (ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or (iii) 400 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B-, C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available; (b) if amount of loan advanced to the associated enterprise including loans to all associated enterprises exceeds a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on the 31st March of the relevant tax year, — (i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or (ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or (iii) 450 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B- or equivalent; or (iv) 600 basis points, where the associated enterprise has credit rating of C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available.
4. Providing corporate guarantee. The commission or fee declared in relation to the eligible international transaction entered into during the tax year is at the rate not less than 1% per annum on the amount guaranteed.
5. Provision of contract research and development services, wholly or partly, relating to generic pharmaceutical drugs. The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense incurred is not less than 24%, where the aggregate operating revenue of such transaction does not exceed a sum of three hundred crore rupees.
6. Manufacture and export of core auto components. The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 12%.
7. Manufacture and export of noncore auto components. The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 8.5%.
8. Receipt of low value-adding intragroup services. The aggregate amount of the low value adding intra-group services during the tax year, including a mark-up not exceeding 5%, does not exceed a sum of ten crore rupees, and the method of cost pooling, the exclusion of shareholder costs and duplicate costs from the cost pool and the reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas associated enterprise, is certified by an accountant.
9. Provision of the data centre services. The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 15%.
(3) For the purposes of this rule, — (a) ―reference rate‖ means, — (i) for US dollar, 6-month Term Secured Overnight Financing Rate (SOFR), currently administered by Chicago Mercantile Exchange (CME), as increased by 45 basis points; (ii) for Euro, 6-month Euro Inter Bank Offered Rate (EURIBOR), currently administered by European Money Markets Institute; (iii) for UK Pound Sterling, 6-month Term Sterling Overnight Index Average (SONIA), currently administered by ICE Benchmark Administration or Refinitiv, as increased by 30 basis points; (iv) for Japanese Yen, 6-month Tokyo Term Risk Free Rate (TORF), currently benchmarked by QUICK Benchmarks Inc, as increased by 10 basis points; (v) for Australian dollar, 6-month Bank Bill Swap Rates (BBSW) currently administered by Australian Securities Exchange; and (vi) for Singapore dollar, 6-month Compounded Singapore Overnight Rate Average (SORA), currently administered by Monetary Authority of Singapore, as increased by 45 basis points; (b) ―credit rating‖ means the credit rating assigned to the associated enterprise by a Securities and Exchange Board of India registered and Reserve Bank of India accredited credit rating agency, which is applicable for the relevant tax year, so however that— (i) where the associated enterprise has only one credit rating, then such rating shall be taken as its credit rating; or (ii) where the associated enterprise has a credit rating from more than one such credit rating agency, then the least of such ratings shall be taken as its credit rating.
(4) The provisions of sub-rules (1) and (2) shall apply for a block period of three tax years commencing from the tax year 2026-2027 and shall continue to apply for block periods subsequent to the aforesaid block period, unless modified.
(5) No comparability adjustment and allowance under section 165(3)(a)(ii) shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and (2).
(6) The provisions of sections 171 and 172 in respect of an international transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction.

Sl. No. (A)	Eligible International Transaction (B)	Circumstances (C)
1.	Provision of information technology services.	The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is not less than 15.5%, where the aggregate operating revenue of such transaction entered into during the tax year does not exceed a sum of two thousand crore rupees.
2.	Advancing of intra-group loans where the amount of loan is denominated in Indian Rupees (rupees).	The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the one-year marginal cost of funds lending rate of State Bank of India as on the 1st April of the relevant tax year plus — (i) 175 basis points, where the associated enterprise has credit rating between AAA to A or its equivalent; or (ii) 325 basis points, where the associated enterprise has credit rating of BBB-, BBB or BBB+ or its equivalent; or (iii) 475 basis points, where the associated enterprise has credit rating between BB to B or its equivalent; or (iv) 625 basis points, where the associated enterprise has credit rating between C to D or its equivalent; or (v) 425 basis points, where credit rating of the associated enterprise is not available and the amount of loan advanced to the associated enterprise including loans to all associated enterprises in Indian Rupees does not exceed a sum of one hundred crore rupees in the aggregate as on the 31st March of the relevant tax year.
3.	Advancing of intra-group loans where the amount of loan is denominated in foreign currency.	The interest rate declared in relation to the eligible international transaction entered into during the tax year is not less than the reference rate of the relevant foreign currency as on the 30th September of the relevant tax year plus — (a) if amount of loan advanced to the associated enterprise including loans to all associated enterprises does not exceed a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on 31st March of the relevant tax year, — (i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or (ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or (iii) 400 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B-, C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available; (b) if amount of loan advanced to the associated enterprise including loans to all associated enterprises exceeds a sum equivalent to two hundred and fifty crore rupees (Indian rupees) in the aggregate as on the 31st March of the relevant tax year, — (i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent; or (ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent; or (iii) 450 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B- or equivalent; or (iv) 600 basis points, where the associated enterprise has credit rating of C+, C, C-, D or equivalent or where the credit rating of the associated enterprise is not available.
4.	Providing corporate guarantee.	The commission or fee declared in relation to the eligible international transaction entered into during the tax year is at the rate not less than 1% per annum on the amount guaranteed.
5.	Provision of contract research and development services, wholly or partly, relating to generic pharmaceutical drugs.	The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense incurred is not less than 24%, where the aggregate operating revenue of such transaction does not exceed a sum of three hundred crore rupees.
6.	Manufacture and export of core auto components.	The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 12%.
7.	Manufacture and export of noncore auto components.	The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 8.5%.
8.	Receipt of low value-adding intragroup services.	The aggregate amount of the low value adding intra-group services during the tax year, including a mark-up not exceeding 5%, does not exceed a sum of ten crore rupees, and the method of cost pooling, the exclusion of shareholder costs and duplicate costs from the cost pool and the reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas associated enterprise, is certified by an accountant.
9.	Provision of the data centre services.	The operating profit margin declared by the eligible assessee from the eligible international transaction entered into during the tax year in relation to operating expense is not less than 15%.

Rule breakdown

IT, research, manufacturing and data-centre margins

For the listed IT-services category, the margin on operating expense must be at least 15.5%, with aggregate operating revenue not exceeding ₹2,000 crore. The generic-pharmaceutical contract-R&D category requires at least 24% and revenue not exceeding ₹300 crore.

Core auto-component manufacture and export requires at least 12%; non-core components at least 8.5%; and data-centre services at least 15%. Apply the Rule 86 operating definitions and the specific eligibility conditions, not an unadjusted accounting margin.

INR intra-group loan spreads

The base is SBI’s one-year MCLR as at 1 April of the relevant tax year. The added spread is 175 basis points for AAA to A, 325 for the stated BBB grades, 475 for BB to B, and 625 for C to D, or equivalent ratings.

The unrated route uses 425 basis points only where aggregate INR loans to all associated enterprises do not exceed ₹100 crore as at 31 March. Do not extend that particular route to a larger unrated INR portfolio.

Foreign-currency loans: aggregate size changes the grid

Use the relevant currency reference rate as at 30 September and the applicable credit-rating spread. For aggregate loans up to ₹250 crore equivalent at 31 March, the spreads are 150, 300 or 400 basis points for the stated rating groups, with the last group also covering no rating.

Above ₹250 crore, the first two spreads remain 150 and 300; the lower-rated BB-to-B group uses 450, while the C-to-D or unrated group uses 600 basis points. Read the complete table for the exact grades and equivalents.

Use the defined reference rate and rating

The currency definitions specify six-month SOFR plus 45 basis points for USD, EURIBOR for euro, term SONIA plus 30 for sterling, TORF plus 10 for yen, BBSW for Australian dollars and compounded SORA plus 45 for Singapore dollars. The table’s rating spread is applied in addition to the defined reference rate.

The rating must meet the SEBI-registration and RBI-accreditation requirements. Where more than one qualifying rating exists, use the least rating under the rule, not the most favourable one.

Guarantees and low value-adding service receipts

A corporate-guarantee fee or commission must be at least 1% per annum on the guaranteed amount, with the separate transaction-eligibility conditions still applying.

For low value-adding group services, the aggregate amount including a mark-up not exceeding 5% must not exceed ₹10 crore. The accountant must certify cost pooling, exclusion of shareholder and duplicate costs, and reasonableness of allocation keys. This is not a general 5% allowance for all group charges.

Block periods and continuing documentation

Sub-rules (1) and (2) apply for a three-tax-year block starting 2026–2027 and continue for subsequent blocks unless modified. The separate IT-services procedure in Rule 91 has its own five-year option provisions.

No comparability adjustment or section 165(3)(a)(ii) allowance is made to an accepted safe-harbour price. Sections 171 and 172 documentation and reporting requirements continue despite the option.

Illustrative margin and spread calculations

If correctly classified operating expense is ₹100 lakh, a 15.5% margin corresponds to ₹15.5 lakh operating profit and ₹115.5 lakh operating revenue. This arithmetic applies only after eligibility and the relevant category conditions are established.

For a hypothetical base rate of 4% and an applicable 300-basis-point spread, the total is 7% per annum. The 4% figure is illustrative, not a reported current reference rate.

Key takeaways

Category-specific conditions

Margins, rates and ceilings differ across the nine rows.

Credit evidence matters

Use the specified rating and least of multiple qualifying ratings.

No extra tolerance on accepted price

The express comparability-adjustment and allowance exclusion applies.

Records still required

Safe harbour does not waive sections 171 and 172.

Practical checklist

Identify the exact category, base and ceiling.
Keep dated rate and qualifying credit-rating evidence.
Reconcile margins to the Rule 86 operating definitions.
Retain documentation and required reports.

Avoid

Do not add a general transfer-pricing tolerance to an accepted safe-harbour price.
Do not choose the highest rating when the rule requires the least.

FAQs

Is the IT safe-harbour margin 15.5% of revenue?

The table measures it in relation to operating expense, subject to the revenue ceiling and other conditions.

Can an unrated INR loan above the ₹100 crore aggregate limit use the 425-basis-point limb?

That particular limb expressly limits aggregate INR loans to ₹100 crore at the stated date.

Can the most favourable of several credit ratings be used?

The rule specifies the least of multiple qualifying ratings.

Does safe harbour remove the accountant’s report requirement?

No. Sub-rule (6) keeps sections 171 and 172 applicable.

Does the 5% mark-up rule apply to every group service?

No. It is part of the specific low value-adding service category with the ₹10 crore aggregate limit and required cost certification.

Glossary

Basis point: One hundredth of a percentage point.
Reference rate: The currency-specific rate defined in sub-rule (3), including its stated adjustment where applicable.

Official sources

Official notified Income-tax Rules, 2026 — Notification 22/2026