Rule 82 of Income 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 82 of the Income-tax Rules, 2026 implements the section 166(9)(a) option: an assessee whose case is referred for the first tax year may have the arm's length price for the next two consecutive tax years determined in the same proceeding, by filing Form No. 46 with an accountant's certificate in Form No. 47 between the end of the third tax year and 30 June following it.
What the option does — sub-rule (1)
The option under section 166(9)(a) may be exercised for determination of the arm's length price for multiple years in a single proceeding, by furnishing Form No. 46 for the two consecutive tax years — the second tax year and the third tax year — immediately following the first tax year in respect of which a reference has been made under that section.
This is new machinery with no parallel rule in the Income-tax Rules, 1962. Its effect is to let one transfer pricing proceeding settle three years instead of one, where the facts have not moved.
Sub-rule (2) fixes the filing window as beginning at the end of the third tax year and ending on 30 June succeeding it. By the time Form No. 46 is filed, all three years are complete and their facts are known. The option is not an advance election — it is a request to fold two settled years into a proceeding already running for the first.
The filing — sub-rules (2) and (3)
- Form No. 46 is furnished within the period beginning from the end of the third tax year and ending on the 30th June succeeding the third tax year.
- Every Form No. 46 shall be accompanied by a certificate from the accountant, as defined in section 515(3)(b), in Form No. 47.
The six conditions — sub-rule (5)
(a) and (b) — the transactions must be similar
The relevant transactions in the second and third tax years must be similar to those in the first tax year. They are treated as similar only if all five of the following hold:
- no change in the method used to determine the arm's length price;
- the functions performed, taking into account assets employed and risks assumed, by the parties remain materially consistent;
- the business activities, the relevant financial, tax and accounting methods, and the classification of the assessee (in the case of a company) remained materially the same;
- the option would still apply where there is a change in the business result or holding structure of the associated enterprise, or a change in the associated enterprise itself, provided there is no material change in the relevant transaction and no material change in the functions performed, assets employed and risks assumed;
- there is no change in the contractual terms — whether or not those terms are formal or in writing — which explicitly or implicitly lay down how responsibilities, risks and benefits are divided between the parties.
It is the only limb that preserves the option rather than testing it. A group reorganisation, a change in the associated enterprise's results, even a substitution of the counterparty entity, does not break the option — as long as the transaction and the FAR profile have not materially moved. Substance governs, not the identity of the counterparty.
Condition (v) runs the other way. It reaches unwritten terms: an informal change in how risk or benefit is shared, never papered, still breaks the similarity test.
(c) and (d) — the compliance record
| Years | Requirement |
|---|---|
| First and second tax years — already furnished | The accountant's report under section 172 on or before the specified date, and the return of income on or before the due date under section 263(1) |
| Third tax year — undertaken | The assessee undertakes to furnish the section 172 report by the specified date and the return by the section 263(1) due date |
A late Form No. 48 or a late return in the first or second year is therefore fatal to the option before any transfer pricing analysis is reached.
(e) and (f) — the two exclusions
- (e) the assessee's case for the first, second and third tax years is not covered under Chapter XVI-B; and
- (f) none of the associated enterprises relevant to the transactions is a resident of a jurisdiction notified under section 176.
The Transfer Pricing Officer's order — sub-rule (4)
Where the conditions in sub-rule (5) are met, the Transfer Pricing Officer shall, within one month from the end of the month in which the option is exercised, pass an order in writing declaring whether the option is valid or invalid.
Objection to the Commissioner — sub-rules (6) and (7)
- If the assessee objects to an order declaring the option invalid, it may file objections with the Commissioner to whom the Transfer Pricing Officer is subordinate, within fifteen days of receipt of the order.
- The Commissioner shall, after providing an opportunity of being heard, pass appropriate orders on the validity of the option, and serve a copy on both the assessee and the Transfer Pricing Officer.
Fifteen days is short. It runs from receipt of the order, and there is no extension mechanism in the rule.
Cancellation — sub-rules (8) and (9)
Where, during proceedings under section 166, it is found that:
- the information provided in Form No. 46 is inaccurate or not bona fide; or
- the accountant furnishes the certificate in Form No. 47 to the same effect; or
- the sub-rule (5) conditions are not met,
the order under sub-rule (4) shall be cancelled. Before cancelling, the Transfer Pricing Officer shall give the assessee a reasonable opportunity of being heard and take the approval of the Commissioner.
The middle limb deserves attention: the accountant's own certificate can be the trigger for cancellation. Form No. 47 is not a formality attached to the application — it is a live statement that can defeat the option if it reports that the conditions have failed.
What happens on invalidity — sub-rule (10)
Where the option is declared invalid under sub-rule (4) or the order is cancelled, the Transfer Pricing Officer proceeds to determine the arm's length price for the first tax year, for which the reference under section 166(1) was received.
So the downside is a return to the ordinary position — the first year is determined on its own — rather than any additional consequence flowing from the failed option.
Compliance checklist
- Check the record for the first and second tax years before considering the option: a late section 172 report or a late return under condition (c) ends the analysis.
- Test all five similarity limbs, including unwritten contractual terms under limb (v).
- Do not abandon the option because the associated enterprise or the holding structure changed — limb (iv) preserves it where substance is unchanged.
- Confirm no relevant associated enterprise is resident in a section 176 notified jurisdiction.
- File Form No. 46 with Form No. 47 in the window from the end of the third tax year to 30 June following it.
- Diarise the fifteen-day objection window from receipt of any invalidity order.
- Keep the third year's undertaking under condition (d) live — the report and return must actually be filed on time.
Common mistakes
- Treating the option as an advance election made in the first year.
- Missing the 30 June cut-off after the third tax year.
- Filing Form No. 46 without Form No. 47.
- Assuming a change of counterparty defeats the option.
- Overlooking an informal change in risk or benefit sharing under limb (v).
- Letting the fifteen-day objection window lapse.