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moreWe are pleased to present the Newsflash on the amended Safe Harbour Rules notified by Central Board of Direct Taxes (“CBDT”) vide Notification No. 21/2025 dated 25th March 2025.
In alignment with the OECD guidelines, the Government of India amended the Income-Tax Act, 1961 to introduce Safe Harbour Rules (‘SHR’) vide insertion of new Section 92CB, through Finance Act, 2009. On 18th September, 2013, the CBDT through a notification issued SHR vide Rules 10TA to 10TG of the Income Tax Rules, 1962 (‘the Rules’) and Form No. 3CEFA in relation to international transactions undertaken by the Indian entities. The SHR were initially applicable from AY 2013-14 to AY 2017-18. Subsequently, the SHR have been extended each year from AY 2017-18 till AY 2024-25. The provisions of SHR are optional, thereby providing flexibility to the taxpayers to declare transfer prices or maintain minimum operating margins.
On 25th March 2025, CBDT has further notified the applicability of existing SHR for AY 2025-26 and AY 2026-27 along-with expansion in the scope and increase in monetary thresholds.
The exiting threshold has been increased from INR 200 Crores to INR 300 Crores, in relation to eligible transactions like provision of SDS/ ITeS/ KPO/ Contract R&D which shall provide an option for more number of companies to opt for SHR. Further, SHR scope has been expanded to cover lithium-ion batteries of electric or hybrid electric vehicles for original equipment manufacturer to support the growing EV Sector.
Furthermore, the extension of SHR for two assessment years ensures greater certainty and predictability. Timely notification of SHR for AY 2025-26 and AY 2026-27 provides appropriate time to the taxpayers to evaluate the applicability of SHR with respect to the existing transfer pricing arrangements.
We trust you would find the update and newsflash in order. Please feel free to get back in case of any pertinent doubt/ query.
We trust you find the same useful.