Rule 240 Aggregation 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.
The rule 240 aggregation rules under the Income-tax Rules, 2026 combine linked accounts across an institution and its related entities, attribute the whole of a joint account to each holder, and convert every balance to US dollars at RBI reference rates — alongside the USD 250,000 entity threshold.
Pre-existing entity accounts — the USD 250,000 gate
Sub-rule (5)(a): unless the institution elects otherwise — either for all pre-existing entity accounts or for a clearly identified group of them — an account with an aggregate balance not exceeding the equivalent of USD 250,000 as on 30 June 2014 (U.S.) or 31 December 2015 (other) need not be reviewed, identified or reported until it exceeds that amount as of the last day of any subsequent calendar year. The 1962 parallel is rule 114H.
Sub-rule (5)(c): only accounts held by entities that are reportable persons, or by a passive non-financial entity with one or more controlling persons who are reportable persons, are treated as reportable — together with accounts of non-participating financial institutions for which aggregate payments are reported under rule 239(1)(h).
Individual accounts have no CRS de minimis at all, and the U.S. thresholds are historic. The USD 250,000 entity gate in sub-rule (5)(a) is the one materially useful exemption in the rule, and it is elective in the institution's favour — it may decline it, for the whole book or for a clearly identified group. Two points on its operation. It is tested on the aggregate balance, so the rule 240 aggregation rules in sub-rule (7)(c) apply to it. And once the aggregate exceeds the threshold on any subsequent 31 December, the account enters review and does not leave it if the balance later falls.
Testing the entity, before rule 240 aggregation is applied
Sub-rule (5)(d) sets out three determinations the institution must make:
| Question | Procedure |
|---|---|
| Is the entity a reportable person? | Review information held for regulatory or customer relationship purposes, including PMLA information. A place of incorporation or organisation, or a foreign address, indicates a reportable person. Treat the account as reportable unless a self-certification or information in the institution's possession or publicly available shows otherwise — or, for U.S. purposes, the entity is a non-U.S. financial institution or its Global Intermediary Identification Number is verified |
| Is it a non-participating financial institution? | Treat it as one if it is an Indian or partner jurisdiction financial institution treated as non-participating by the United States, or if it is a financial institution that is neither Indian nor partner jurisdiction — unless a self-certification of its status is obtained or its GIIN is verified |
| Is it a passive NFE with reportable controlling persons? | Obtain a self-certification of its status unless information in the institution's possession or publicly available reasonably shows it is active or a financial institution other than a managed investment entity; determine controlling persons using PMLA information; and test whether any of them is reportable |
Sub-rule (5)(d)(iii)(C) draws a line that is easy to miss because it is a different threshold from the USD 250,000 review gate. For a pre-existing entity account of a non-financial entity with an aggregate balance not exceeding USD 1 million, the institution may rely on the PMLA information it already holds to decide whether a controlling person is reportable. Above USD 1 million, it must obtain a self-certification from the account holder or from the controlling person. So an entity book has two thresholds working on it — USD 250,000 for whether to review at all, and USD 1 million for how far the evidence has to go — and both are tested on aggregated, dollar-converted balances.
Sub-rule (5)(e) sets the completion dates — 30 June 2016 for U.S. accounts above the threshold at 30 June 2014, 31 December 2016 for CRS accounts above it at 31 December 2015, and, for an account crossing the threshold later, within the calendar year following the year it crossed. It also requires a re-determination where a change in circumstances makes the institution know or have reason to know that the self-certification or other documentation is incorrect or unreliable.
New entity accounts and rule 240 aggregation
Sub-rule (6) works on a self-certification obtained at opening, which may form part of the account opening documentation, whose reasonableness is confirmed against the information obtained at opening including PMLA documentation. Three features differ from the pre-existing procedure:
- where the entity certifies it has no residence for tax purposes, the institution may rely on the address of its principal office;
- for the passive NFE test, the institution relies on a self-certification unless information in its possession or publicly available reasonably shows the holder is not passive — the burden is stated the other way round from sub-rule (5); and
- for controlling persons it may rely on PMLA information with no threshold, and where it is not legally required to collect PMLA information for a CRS account, it must apply substantially similar procedures.
The rule 240 aggregation rules
Sub-rule (7)(c) contains the rule 240 aggregation machinery, and it governs every threshold in the rule:
| Item | Rule |
|---|---|
| Individual accounts | Aggregate all financial accounts maintained by the institution or by a related entity — but only to the extent the institution's computerised systems link them by a data element such as client number or TIN and allow balances to be aggregated |
| Entity accounts | The same test, applied to accounts held by an entity |
| High value determination | Additionally, aggregate all accounts that a relationship manager knows or has reason to know are directly or indirectly owned, controlled or established by the same person, other than in a fiduciary capacity |
| Joint accounts | Each holder is attributed the entire balance or value of the jointly held account |
| Currency | Any account in rupees or another permissible currency designated by the RBI is converted to US dollars at the end of the reporting period at RBI reference rates, and the converted amount is used for every threshold in rules 238, 239 and 240 |
The rule 240 aggregation requirement for ordinary accounts is expressly limited by what the institution's computerised systems can do: accounts are aggregated only to the extent they are linked by a client number, TIN or similar element. That is an unusual formulation — the legal obligation follows the system's capability rather than the other way round.
The high value test breaks that pattern. There, the institution must also aggregate every account a relationship manager knows or has reason to know is owned or controlled by the same person, whether or not the systems link them. Human knowledge overrides the systems limitation at exactly the point where the stakes are highest — and it is the reason a relationship manager attestation belongs in any high value review.
Explanation 1 to sub-rule (7)(c) is the provision with the largest arithmetic effect: each holder of a joint account is attributed the entire balance. Two holders of a USD 600,000 joint account are each treated as holding USD 600,000, and if either has another USD 500,000 elsewhere, that person crosses the USD 1 million high value line.
Two further reliability rules
- Sub-rule (7)(a)(I) — an institution may not rely on a self-certification or documentary evidence if it knows or has reason to know it is incorrect or unreliable.
- Sub-rule (7)(b) — an institution may presume that an individual beneficiary of a cash value insurance or annuity contract receiving a death benefit, other than the owner, is not a reportable person — unless it has actual knowledge or reason to know otherwise. The Explanation deems it to have reason to know if the information it holds on the beneficiary contains any of the six indicia.
Sub-rule (9) closes the rule: exchange of information on transactions in relevant crypto-assets is only for the limited purposes of administration of taxes by the relevant jurisdiction.
Worked example
| Facts | Position under rule 240 |
|---|---|
| Pre-existing entity account of USD 180,000 at 31 December 2015 | No review unless the institution declines the election |
| Same account reaches USD 300,000 on a later 31 December | Enters review in the following calendar year |
| Balance later falls below USD 250,000 | It does not leave the review population |
| Entity incorporated in Mauritius, no self-certification | Place of incorporation indicates a reportable person |
| Entity's GIIN verified | Not treated as a U.S. reportable account |
| Passive NFE with USD 800,000; PMLA data identifies the controllers | PMLA data suffices — below USD 1 million |
| Same entity at USD 1.4 million | Self-certification required |
| New entity certifies it has no tax residence | Rely on the principal office address |
| Two accounts linked only by name, not by client number | Not aggregated by the systems test |
| Relationship manager knows the same person controls both | Aggregated for the high value test |
| Joint account of USD 600,000 with two holders | Each attributed USD 600,000 |
| Rupee account tested at the transaction-date rate | Convert at the end of the reporting period at RBI reference rates |
| Death benefit beneficiary with a foreign address on file | The presumption is displaced — an indicium is present |
Compliance checklist
- Decide, and document, whether to take the USD 250,000 election for the whole entity book or a clearly identified group.
- Apply the USD 1 million line to decide between PMLA data and a self-certification for controlling persons.
- Verify a GIIN where the entity claims financial institution status.
- Note the reversed burden on the passive NFE test for new entity accounts.
- Map which accounts the computerised systems actually link, since that defines the rule 240 aggregation obligation.
- Add a relationship manager attestation to the high value review — it overrides the systems limit.
- Attribute the whole of a joint balance to each holder.
- Convert every balance to US dollars at RBI reference rates at the end of the reporting period.
Common mistakes
- Confusing the USD 250,000 review gate with the USD 1 million evidence line.
- Dropping an entity account out of review when its balance falls back.
- Splitting a joint balance between holders for the thresholds.
- Aggregating only within one entity, when rule 240 aggregation reaches linked related-entity accounts.
- Treating the systems limitation as absolute for high value accounts.
- Converting currency at an average or transaction-date rate.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallel to rule 240 is rule 114H, given for tracing only. The rule 240 aggregation and threshold provisions carry the original FATCA and CRS implementation dates forward unchanged. Verify the current text before applying a threshold.
Key Facts About Rule 240 Aggregation
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is the pre-existing entity account threshold?
Unless the institution elects otherwise, an account with an aggregate balance not exceeding the equivalent of USD 250,000 as on 30 June 2014 or 31 December 2015 need not be reviewed until it exceeds that amount as of the last day of any subsequent calendar year.
Which pre-existing entity accounts are reportable?
Those held by one or more entities that are reportable persons, or by a passive non-financial entity with one or more controlling persons who are reportable persons — and accounts of non-participating financial institutions for which aggregate payments are reported.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Rule 240 Aggregation: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.