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Rule 98Published

Rule 98: Domestic safe harbour option procedure

Rule 98 sets the domestic safe harbour procedure: file a complete Form 49 by the prescribed return due date, with the return filed on or before the form date, then comply with eligibility verification and any evidence request. It also provides hearing rights, an objection route and decision deadlines.

Official notified Income-tax Rules, 2026

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Rule 98 - Procedure governing safe harbour rules for specified domestic transactions

(1) For the purposes of exercising of the option for safe harbour, — (a) the assessee shall furnish Form No. 49, complete in all respects, to the Assessing Officer on or before the due date specified in section 263(1)(c) for furnishing the return of income for the relevant tax year; and (b) the return of income for the relevant tax year is to be furnished by the assessee on or before the date of furnishing of Form No. 49.

(2) On receipt of Form No. 49, the Assessing Officer shall verify whether— (a) the assessee exercising the option is an eligible assessee; and (b) the transaction in respect of which the option is exercised is an eligible specified domestic transaction, before the option for safe harbour by the assessee is treated to be validly exercised.

(3) Where the Assessing Officer doubts the valid exercise of the option for the safe harbour by an assessee, he may require the assessee, by notice in writing, to furnish such information or documents or other evidence as he may consider necessary, and the assessee shall furnish the same within the time specified in such notice.

(4) Where — (a) the assessee does not furnish the information or documents or other evidence required by the Assessing Officer; or (b) the Assessing Officer finds that the assessee is not an eligible assessee; or (c) the Assessing Officer finds that the specified domestic transaction in respect of which the option referred to under sub-rule (1) has been exercised is not an eligible specified domestic transaction; or (d) the tariff is not in accordance with the circumstances specified under rule 97, the Assessing Officer shall, by order in writing, declare the option exercised by the assessee under sub-rule (1) to be invalid, after giving a reasonable opportunity of being heard to the assessee, and cause a copy of the said order to be served on the assessee.

(5) If the assessee objects to the order of the Assessing Officer under sub-rule (4) declaring the option to be invalid, he may file his objections with the Principal Commissioner or the Commissioner, as the case may be, to whom the Assessing Officer is subordinate, within fifteen days of receipt of the order of the Assessing Officer.

(6) On receipt of the objection referred to in sub-rule (5), the Principal Commissioner or the Commissioner, as the case may be, shall after providing a reasonable opportunity of being heard to the assessee, pass appropriate orders in respect of the validity or otherwise of the option exercised by the assessee and cause a copy of the said order to be served on the assessee and the Assessing Officer.

(7) For the purposes of this rule, — (a) no order under sub-rule (4) shall be made by an Assessing Officer after expiry of a period of three months from the end of the month in which Form No. 49 is received by him; and (b) the order under sub-rule (6) shall be passed by the Principal Commissioner or Commissioner, as the case may be, within a period of two months from the end of the month in which the objection filed by the assessee under sub-rule (5) is received by him.

(8) If the Assessing Officer or the Principal Commissioner or the Commissioner, as the case may be, does not pass an order within the time specified under sub-rule (7), then the option for safe harbour exercised by the assessee shall be treated as valid.

(9) Form No. 49 shall be furnished electronically either under digital signature or through electronic verification code and shall be verified by the person who is authorised to verify the return of income of the assessee under section 265.

(10) The Assessing Officer may make a reference under section 166 in respect of specified domestic transaction other than the eligible specified domestic transaction.

Introduction

The filing sequence here differs from Rule 101’s business-income attribution option. For Rule 98, the return must be furnished on or before the date Form 49 is furnished; the form itself must be on or before the section 263(1)(c) due date.

Rule breakdown

Step 1: file the return and Form 49 in the correct order

Confirm the applicable section 263(1)(c) due date. Furnish the return no later than the date on which Form 49 is furnished, and file the complete form by that due date.

Form 49 is furnished electronically under digital signature or electronic verification code and verified by the person authorised under section 265. Keep both acknowledgments.

Step 2: respond to eligibility and pricing verification

The Assessing Officer verifies the eligible assessee and eligible transaction conditions. If there is doubt, the officer may require information, documents or other evidence by a written notice, with compliance within the stated time.

Step 3: understand invalidity and hearing rights

The rule lists non-furnishing of required evidence, ineligible assessee, ineligible transaction and tariff inconsistency with Rule 97 as grounds for an invalidity order. The order must be in writing, follow a reasonable hearing opportunity and be served on the assessee.

Step 4: track objections and statutory time limits

An objection goes to the Principal Commissioner or Commissioner to whom the AO is subordinate, within fifteen days after receipt. That authority must provide a reasonable hearing opportunity. Track the three-month period from the end of the form-receipt month for the AO’s order, and the two-month period from the end of the objection-receipt month for the objection order.

Other transactions remain outside this protection

The Assessing Officer may still refer a specified domestic transaction other than an eligible specified domestic transaction under section 166. Keep the eligible transaction list separate from other dealings.

Key takeaways

Form and return timing

Complete Form 49 is due by the section 263(1)(c) date, and the return must precede it or be filed on the same date.

Fifteen-day objection period

An objection to the Assessing Officer’s invalidity order may be filed within fifteen days of its receipt.

Decision clocks

The AO’s invalidity order has a three-month month-end clock; the Commissioner’s objection order has a two-month month-end clock.

No order within the specified period

Sub-rule (8) treats the option as valid if the relevant authority does not pass the order within sub-rule (7)’s time.

Practical checklist

  • Calendar the return/form sequence and keep electronic acknowledgments.
  • Respond to every evidence notice by its stated deadline.
  • Record service and receipt dates for orders and objections.
  • Compute decision periods from the end of the relevant month.

Avoid

  • Do not copy Rule 101’s form-before-return sequence into Rule 98.
  • Do not overlook the fifteen-day objection window.

FAQs

Must Form 49 be filed before the return under Rule 98?

No. Rule 98(1)(b) requires the return to be furnished on or before the date Form 49 is furnished. The form must also meet the section 263(1)(c) due date.

What if the authority does not pass its order within the specified time?

Sub-rule (8) treats the option as valid where the relevant authority does not pass the order within sub-rule (7)’s period.

Does a valid option protect every domestic transaction?

No. Sub-rule (10) permits a section 166 reference for other specified domestic transactions.

Related rules