Advance Ruling under the Income Tax Act 2025: Who Can Apply, Fee and Procedure

An advance ruling is a binding written answer from the Board for Advance Rulings (BAR) on how the Income-tax Act, 2025 applies to a transaction you have done or plan to do. The application is made in Form No. 120 with a fee of Rs 10,000 to Rs 10 lakh, depending on who applies and the size of the transaction (rule 200). The Board must pronounce its ruling within six months of receiving the application (section 384(6)).

The provisions sit in Chapter XVIII-D, sections 380 to 389, with procedure in rules 200 to 202 of the Income-tax Rules, 2026. This guide covers who qualifies as an applicant, what the Board can and cannot decide, the step-by-step procedure, the timelines and the appeal route. All text is as amended by the Finance Act, 2026, effective 1 April 2026 (tax year 2026-27). It is information, not advice on any particular transaction.

What is an advance ruling under the Income Tax Act 2025?

Section 380(a) defines an "advance ruling" as a determination by the Board for Advance Rulings. It covers five situations:

1. Clause (i): a transaction undertaken or proposed by a non-resident applicant.
2. Clause (ii): the tax liability of a non-resident arising out of a transaction a resident applicant has done or proposes to do with that non-resident.
3. Clause (iii): the tax liability of a resident applicant arising from the applicant's own transaction. This includes any question of law or fact stated in the application.
4. Clause (iv): an issue about computing total income that is already pending before an income-tax authority or the Appellate Tribunal.
5. Clause (v): whether a proposed arrangement, by a resident or a non-resident, is an impermissible avoidance arrangement under Chapter XI.

The ruling is "advance" because you can ask before the transaction is done. The Act also allows it for a transaction already undertaken.

Who can apply for an advance ruling?

Section 380(b) defines the "applicant". Residents get access in only some cases, and two of those need a Central Government notification.

Applicant	Section 380(b)	Needs a notification?
Non-resident with a transaction (clause (a)(i))	(b)(i)	No
Resident dealing with a non-resident (clause (a)(ii))	(b)(ii)	No
Resident on own tax liability (clause (a)(iii))	(b)(iii)	Yes, only a class or category of persons notified by the Central Government
Resident with an issue pending before an income-tax authority or Tribunal (clause (a)(iv))	(b)(iv)	Yes, only a class or category of persons notified by the Central Government
Anyone asking whether an arrangement is an impermissible avoidance arrangement (clause (a)(v))	(b)(v)	No

So an ordinary resident taxpayer cannot assume the route is open. Check whether the Central Government has notified a class that includes your client before preparing an application. This article does not name any notification because none is in the source text reviewed.

Who decides: the Board for Advance Rulings

Under section 381, the Central Government constitutes one or more Boards, from a date it notifies. Each Board has two members, each an officer not below the rank of Chief Commissioner.

The Board has the powers of a civil court as listed in section 246 (section 387(1)). Its proceedings are treated as judicial proceedings (section 387(2)). It can regulate its own procedure (section 388). A vacancy or a defect in how the Board is constituted does not invalidate its proceedings or a ruling (section 382).

How do you apply? Form 120, fee and signing

Section 383 and rule 200 set the mechanics.

• Form: Form No. 120, filed electronically by a resident or non-resident applicant (rule 200(1), (3)).
• Content: the application must state the question on which the ruling is sought (section 383(1)).
• Fee and proof: the fee must accompany the application, with proof of payment (section 383(2); rule 200(4)).
• Signing: if the applicant must file a return, the person who verifies the return under section 265 signs. This is by digital signature if the return needs one, otherwise by electronic verification code. If the applicant is not required to file a return, a person holding a valid power of attorney signs, using digital signature or EVC as the Board specifies (rule 200(3)).

What is the fee for an advance ruling?

Sl. No. (rule 200(2))	Category	Transaction amount	Fee
1	Non-resident applicant under section 380(a)(i), or resident applicant under 380(a)(ii)	Less than Rs 100 crore	Rs 2,00,000
		Rs 100 crore to Rs 300 crore	Rs 5,00,000
		More than Rs 300 crore	Rs 10,00,000
2	Resident applicant under section 380(a)(iii)	Rs 100 crore to Rs 300 crore	Rs 5,00,000
		More than Rs 300 crore	Rs 10,00,000
3	Any other applicant	In all cases	Rs 10,000

The amount is that of the transaction or transactions for which the ruling is sought. Row 2 lists only the two higher bands. For a resident under clause (a)(iii) with a smaller transaction, read the rule text carefully and confirm which row applies before paying.

What happens after you apply? Step by step

In more detail, under section 384:

1. Copy and records (s. 384(1)). The Board forwards a copy of the application to the Principal Commissioner or Commissioner and asks for the relevant records, which are returned at the earliest opportunity.
2. Allow or reject (s. 384(2)). After examining the application and records, the Board allows or rejects it by an order. A copy goes to the applicant and the Commissioner (s. 384(5)).
3. Hearing before rejection (s. 384(4)). The Board cannot reject without giving the applicant a hearing and recording its reasons.
4. Further material and hearing on request (s. 384(6), (7)). For an allowed application, the Board examines further material placed before it or obtained by it. If the applicant asks, it must give a hearing, in person or through an authorised representative (meaning as in section 515(3)(a), per s. 384(9)).
5. Ruling (s. 384(6)). The Board pronounces its ruling in writing within six months of receiving the application.
6. Certified copy (s. 384(8); rule 201). A signed, certified copy goes to the applicant and the Commissioner. Rule 201 says the Commissioner, Deputy Commissioner or the Board, as the case may be, certifies it as a true copy.

When will the Board reject an application?

Section 384(3) lists three grounds for which an application "shall be rejected". The question raised:

• (a) is already pending before any income-tax authority, the Appellate Tribunal or any court. A resident applicant under section 380(b)(iii) is excepted from the authority and Tribunal part.
• (b) involves determining the fair market value of any property.
• (c) relates to a transaction or issue designed, on the face of it, to avoid income-tax. A resident applicant under section 380(b)(iii) and an applicant under section 380(b)(iv) are excepted.

Ground (s. 384(3))	Question raised	Exception
(a)	Already pending before an income-tax authority, the Appellate Tribunal or any court	Resident applicant under s. 380(b)(iii): excepted from the authority and Tribunal part
(b)	Involves determining the fair market value of any property	None stated
(c)	Transaction or issue designed, on the face of it, to avoid income-tax	Applicants under s. 380(b)(iii) and s. 380(b)(iv)

Related rule: once a resident has applied under section 383(1), no income-tax authority or the Appellate Tribunal can proceed to decide the same issue (section 385).

Can you withdraw an advance ruling application?

Yes, within thirty days from the date of the application (section 383(3)). After that the Act gives no withdrawal right.

Can an advance ruling be challenged or cancelled?

Appeal to the High Court

An applicant aggrieved by a ruling or order of the Board can appeal to the High Court within sixty days from the date it was communicated. The same route is open to the Assessing Officer acting on the Commissioner's directions (section 389(1)). If the High Court is satisfied that there was sufficient cause for delay, it can allow a further thirty days (section 389(2)). Rule 202 says the form and manner follow the procedure of the jurisdictional High Court.

For the wider appeal ladder, see our guide to income tax appeals before the CIT(A), ITAT, High Court and Supreme Court.

Ruling void for fraud or misrepresentation

If the Board finds, on a representation by the Commissioner or otherwise, that a ruling was obtained by fraud or misrepresentation, it can declare the ruling void from the start (section 386(1)). The Act then applies to the applicant as if the ruling had never been made. The period from the date of the ruling to the date of the voiding order is excluded when applying the Act. A copy of the order goes to the applicant and the Commissioner (section 386(2)).

Worked example 1: which fee applies?

Assumptions: applications made in tax year 2026-27, all by the categories shown in rule 200(2), Table Sl. No. 1.

Applicant	Transaction	Row in rule 200(2)	Fee
A non-resident company selling shares of an Indian company (section 380(a)(i))	Rs 80 crore, which is less than Rs 100 crore	Sl. No. 1, first band	Rs 2,00,000
An Indian company paying a non-resident for services (section 380(a)(ii))	Rs 150 crore, within Rs 100 to Rs 300 crore	Sl. No. 1, second band	Rs 5,00,000
A non-resident investor in a deal (section 380(a)(i))	Rs 400 crore, above Rs 300 crore	Sl. No. 1, third band	Rs 10,00,000

The band is picked from the amount of the transaction (or all transactions) for which the ruling is sought. An applicant in any category not named in Sl. No. 1 or 2 pays the flat Rs 10,000 under Sl. No. 3.

Worked example 2: a timeline with dates

Assumptions: an eligible applicant files Form 120 on 12 January 2027 (tax year 2026-27) and the Board receives it the same day. The Board pronounces its ruling on the last permitted day and the ruling is communicated on 20 July 2027. The day of the event is excluded when counting days, which is the usual convention. Confirm the counting rule with the High Court's procedure before relying on a last date.

Step	Rule	Calculation	Date
Last day to withdraw	s. 383(3): 30 days from the date of application	12 Jan + 30 days	11 February 2027
Ruling due by	s. 384(6): 6 months from receipt	12 Jan + 6 months	12 July 2027
Appeal to High Court	s. 389(1): 60 days from communication	20 Jul + 60 days (11 days left in July, 31 in August, 18 in September)	18 September 2027
Appeal with condonation	s. 389(2): further 30 days, sufficient cause	18 Sep + 30 days	18 October 2027

Real-life example 1: Meena and a pending dispute

Meena, a resident, runs a manufacturing business. Her return for an earlier year is under scrutiny and an issue on how to compute one deduction is pending before the Assessing Officer. She wants a final view from the Board. Under section 380(a)(iv), such a pending computation issue can be the subject of a ruling, but section 380(b)(iv) limits the route to residents in a class the Central Government has notified. If her category is not notified, she cannot apply and the issue goes through the normal assessment and appeal path.

Real-life example 2: Ravi and a rejected application

Ravi, a resident who falls in a class notified under section 380(b)(iii) (without that he could not apply at all), applies to the Board asking it to fix the fair market value of a plot he plans to sell, because he wants certainty on his tax. Section 384(3)(b) requires rejection of any application that involves determining the fair market value of property. The Board must still hear him and record reasons before it rejects (section 384(4)). Ravi may appeal the order to the High Court within 60 days of it being communicated (section 389(1)).

Common mistakes

• Assuming every resident can apply. Clauses (b)(iii) and (b)(iv) of section 380 apply only to classes the Central Government has notified.
• Asking the Board to fix a property's fair market value. That is a mandatory ground of rejection under section 384(3)(b).
• Missing the 30-day withdrawal window in section 383(3).
• Treating the six-month period as a promise of the date. It runs from receipt of the application, so incomplete filings and further material can affect how smoothly the Board can proceed.
• Counting the 60-day appeal period from the date of the ruling rather than the date it was communicated (section 389(1)).
• Leaving out facts or misstating them. A ruling obtained by fraud or misrepresentation can be declared void from the start (section 386).

Quick reference: time limits and fees

Item	Limit	Reference
Form	Form No. 120, filed electronically	Rule 200(1), (3)
Fee	Rs 10,000, Rs 2 lakh, Rs 5 lakh or Rs 10 lakh by category and amount	Rule 200(2)
Withdrawal	Within 30 days of the application	Section 383(3)
Ruling	Within 6 months of receipt of application	Section 384(6)
Appeal to High Court	60 days from communication, plus 30 days on sufficient cause	Section 389(1), (2)
Board	Two members, each Chief Commissioner rank or above	Section 381(2)

Where this is in the Act

• Section 380: meaning of advance ruling, applicant, application, Board and Member.
• Section 381: constitution of the Board for Advance Rulings.
• Section 382: vacancies do not invalidate proceedings.
• Section 383 and rule 200: application, Form 120, fee, withdrawal.
• Section 384 and rule 201: procedure, grounds of rejection, six-month ruling, certified copies.
• Section 385: no parallel decision by authorities for a resident applicant's issue.
• Section 386: void ruling for fraud or misrepresentation.
• Sections 387 and 388: powers and procedure of the Board.
• Section 389 and rule 202: appeal to the High Court.

For a CA firm, an advance ruling is a long matter with fixed dates: the withdrawal window, the six-month period and the appeal period. Finexo's practice management software lets you track such client matters and their deadlines in one place. It does not file applications or give legal opinions.