Rule 122 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 122 of the Income-tax Rules, 2026 governs a bilateral or multilateral advance pricing agreement request in Form No. 51 — the process starts only once the foreign associated enterprise has begun abroad.
The precondition
Sub-rule (1): where a person has made a request for a bilateral or multilateral advance pricing agreement in an application filed in Form No. 51 in accordance with rule 106, the request is dealt with under this rule. The 1962 parallel is rule 44GA.
Sub-rule (2): the process shall commence only if the associated enterprise located outside India has initiated the process of advance pricing agreement with the competent authority of the other country.
This is the first practical point about rule 122. Filing Form No. 51 in India does not begin a bilateral process — the foreign associated enterprise must have initiated with its own competent authority. Groups routinely file on the Indian side and then discover the process is dormant because the overseas filing has not been made or has been made in a different form. The two filings should be planned and dated together.
The sequence
| Sub-rule | Step |
|---|---|
| (3) | On intimation of the request, the competent authority of India consults and ascertains the willingness of the competent authority of the other country or countries for initiation of negotiation |
| (4) | If they are willing, the competent authority of India enters into negotiation and endeavours to reach mutually acceptable terms |
| (5) | On reaching agreement, it formalises a mutual agreement procedure arrangement with the other competent authority and intimates the applicant |
| (6) | On failure to reach agreement on mutually acceptable terms, the applicant is informed |
| (8) | The applicant conveys acceptance or otherwise within one month from the end of the month in which the communication was received |
Sub-rule (7) is the one applicants find hardest: "The applicant shall not be entitled to be part of discussion between competent authority of India and the competent authority of the other country or countries" — though it may communicate or meet the competent authority of India for the purpose of entering into the advance pricing agreement.
Sub-rule (7) draws a hard line. The applicant has no seat at the competent authority negotiation, and learns the outcome only when it is intimated under sub-rule (5) or (6). Its only channel of influence is the separate right to communicate or meet the competent authority of India. That makes the quality and timing of the material put to the Indian competent authority — before and during the negotiation — the applicant's principal lever.
If the applicant does not accept
Sub-rule (9): if the applicant does not accept the agreement, it may:
- continue the advance pricing agreement process without the benefit of the mutual agreement procedure; or
- withdraw the application in accordance with rule 107.
The first option converts what was sought as a bilateral agreement into a unilateral one — certainty on the Indian side only, with no protection against the other jurisdiction taking a different view. The second ends the process; and under rule 109(15), where proceedings are closed the rule 106 fee is not refunded.
How rule 122 meshes with rule 109
| Provision | Link |
|---|---|
| Rule 109(7) | Where the applicant requests a bilateral or multilateral agreement, the competent authority of India invokes the rule 122 procedure in addition to the rule 109 processing |
| Rule 109(5) and (6) | The competent authority forwards the application to the Principal Chief Commissioner (International Taxation), whose team enquires and prepares a draft report for the competent authority of India |
| Rule 109(8) | The proposed mutually agreed draft agreement must enumerate the effect of the arrangement referred to in rule 122(5), as accepted by the applicant under rule 122(8) |
So the two rules run in parallel rather than in sequence: rule 109 handles the domestic fact-finding and the eventual agreement with the Board, while rule 122 handles the treaty negotiation whose outcome is then written into that agreement.
Worked example
| Facts | Position under rule 122 |
|---|---|
| Indian subsidiary files Form No. 51 seeking a bilateral APA; the parent has not approached its own authority | The process does not commence |
| Parent initiates abroad two months later | Competent authority of India consults the other authority on willingness |
| Other competent authority declines to negotiate | No bilateral route; the applicant may continue unilaterally or withdraw |
| Applicant asks to attend the competent authority meetings | Not entitled — sub-rule (7) |
| Arrangement intimated on 8 October | Acceptance due by 30 November |
| Applicant rejects the arrangement | May proceed without the MAP benefit or withdraw under rule 107 |
| Application withdrawn | Rule 106 fee not refunded |
Compliance checklist
- Coordinate the Indian Form No. 51 filing with the associated enterprise's filing abroad.
- Confirm the foreign process has actually been initiated before expecting movement.
- Put the substantive case to the competent authority of India early — that is the only channel available.
- Expect to be outside the competent authority discussions.
- Diarise the one-month acceptance window from the end of the month of intimation.
- Model the unilateral fallback before rejecting an arrangement.
- Note that withdrawal forfeits the rule 106 fee.
- Check that the rule 122(5) arrangement is reflected in the rule 109(8) draft agreement.
Common mistakes
- Filing in India alone and waiting for a bilateral process to start.
- Expecting to participate in the competent authority negotiation.
- Missing the one-month response to the intimated arrangement.
- Withdrawing without weighing the unilateral alternative.
- Assuming a fee refund on withdrawal.