Rule 95: Who qualifies for domestic safe harbour
Rule 95 limits the domestic safe harbour framework to two types of assessee: a Government company in the listed electricity businesses, or a co-operative society procuring and marketing milk and milk products. The definition also requires a valid safe harbour option.
Official notified Income-tax Rules, 2026Need advice on Rule 95?
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.
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Bare law
Rule 95 - Eligible assessee for safe harbour rules for specified domestic transactions
An "eligible assessee" means a person who has exercised a valid option for application of safe harbour rules in accordance with the provisions of rule 97, and — (a) is a Government company engaged in the business of generation, supply, transmission or distribution of electricity; or (b) is a co-operative society engaged in the business of procuring and marketing milk and milk products.
Introduction
Entity eligibility is the first test. The transaction itself must still fall within Rule 96, and the pricing and option requirements in Rules 97 and 98 remain relevant.
Rule breakdown
Government-company electricity businesses
Use the Government company meaning imported by Rule 94. Check the business against the listed electricity activities and separately classify the transaction under Rule 96; a broad business description is not a substitute for the transaction test.
Milk and milk-product co-operatives
The entity must be a co-operative society engaged in procuring and marketing milk and milk products. Rule 96 separately confines the eligible purchase transaction to purchases by the co-operative from its members.
Apply the option and pricing rules together
Rule 95 refers to a valid option in accordance with Rule 97. Rule 97 in turn conditions acceptance on an option validly exercised under Rule 98. Keep the form, return and pricing evidence as one compliance file.
Illustrative eligibility check
A privately owned electricity supplier cannot rely on the Government-company limb merely because its tariff is regulated. A milk co-operative must still establish that the relevant purchases and pricing meet the following rules. These examples identify necessary checks; they are not findings on any particular taxpayer.
Key takeaways
Two categories
The electricity category is restricted to a Government company; the milk category is a co-operative society.
Business description matters
The electricity activities listed are generation, supply, transmission or distribution. The milk category concerns procuring and marketing milk and milk products.
Option is part of eligibility
The opening definition requires a valid option; merely carrying on a listed activity is insufficient.
Practical checklist
- Document the entity’s legal status and actual business.
- Match each proposed transaction to Rule 96.
- Confirm the Rule 98 option and Rule 97 pricing conditions.
Avoid
- Do not extend the rule to every company in the power sector.
- Do not assume all dealings of an eligible co-operative qualify.
FAQs
Can any electricity company use this safe harbour?
No. Rule 95’s electricity limb requires a Government company engaged in one of the listed electricity businesses, together with the valid-option requirement.
Are all milk traders covered?
No. The milk limb is for a co-operative society engaged in procuring and marketing milk and milk products; transaction and pricing requirements must also be checked.