{"id":3979,"date":"2017-06-17T18:20:21","date_gmt":"2017-06-17T12:50:21","guid":{"rendered":"https:\/\/taxclick.org\/?p=3979"},"modified":"2017-06-24T09:39:13","modified_gmt":"2017-06-24T04:09:13","slug":"amendment-safe-harbour-rules-step-towards-sanity","status":"publish","type":"post","link":"https:\/\/taxclick.org\/type\/income-tax\/amendment-safe-harbour-rules-step-towards-sanity\/","title":{"rendered":"Amendment in Safe Harbour Rules  \u2013 A step towards sanity"},"content":{"rendered":"<ul style=\"list-style-type: square;\">\n<li style=\"text-align: justify;\">\n<h2><span style=\"font-size: 18pt;\">Introduction<\/span><\/h2>\n<\/li>\n<\/ul>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Due to the increasing complexity of transaction between enterprises of the same group and manipulation of prices by them in order to avoid the burden of taxation in relation to international transactions, the Transfer pricing regulations by the Finance Act 2001 were established.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Transfer Pricing regulations are applicable in case of all international transaction and specified domestic transactions as mentioned under section 92B and 92BA of Income Tax Act, 1961 respectively.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">The aim is to ensure that income arising from transactions between Associated Enterprises(AE) (as defined under section 92A of Income Tax ACT,1961) shall be computed having regard to Arm\u2019s length price(ALP).<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Section 92C of the Income Tax Act, 1961 provides for various methods according to which an enterprise carrying out international transactions ought to determine the ALP having regard to nature of transaction class of transaction or class of associated persons or functions performed by such persons and other relevant factors.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">The introduction of section 92CB for the determination of ALP under section 92C and 92B will be subject to Safe Harbour Rules on account of rising number of transfer pricing audits and prolonged litigation.<\/span><\/li>\n<\/ul>\n<p><a href=\"https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093.jpg\"><img decoding=\"async\" class=\" wp-image-3981\" src=\"https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093-300x194.jpg\" alt=\"\" width=\"370\" height=\"239\" srcset=\"https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093-300x194.jpg 300w, https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093-768x497.jpg 768w, https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093-1024x662.jpg 1024w, https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093.jpg 1073w\" sizes=\"(max-width: 370px) 100vw, 370px\" \/><\/a><\/p>\n<ul style=\"text-align: justify; list-style-type: square;\">\n<li>\n<h2><span style=\"font-size: 14pt;\">The Concept of Safe Harbour under Income Tax Act, 1961<\/span><span style=\"font-size: 14pt;\"><strong><br \/>\n<\/strong><\/span><\/h2>\n<\/li>\n<\/ul>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">The term Safe Harbour is defined under section 92CB of the Income Tax Act, 1961 as circumstances under which the authorities shall accept transfer pricing declared by the assessee. It can also be construed as a conduct which will be deemed not to violate the rules of the Act.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Safe Harbour Rules were inserted by a notification issued by Central Board of Direct Taxes (CBDT) on 18<sup>th<\/sup> September, 2013. This notification inserted Rule 10TA to 10TG in the Income Tax Act, 1961.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Safe Harbour rules should not be construed as ALP, but in nature of presumptive income.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">It is applicable in case of international transactions as well as specified domestic transactions.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">In order to avail the benefit of Safe Harbour in relation to International Transactions, the provisions relating to the procedure laid down under rule and 10TE of Income Tax Rules, 1962 ought to be followed by the assessee.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">However Safe Harbour Rules shall not be applicable in relation to eligible international transactions entered into with associated enterprise and located in any country or territory notified under section 94A or in a no tax or low tax country.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">These rules are beneficial for certain taxpayers as they can follow a set of simple rules and calculate the transfer price which shall be accepted by the Income Tax Authorities.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">These rules are not only beneficial to the tax payers but also to the tax authorities as it will cut down majority of compliance procedures.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The Safe Harbour Rules provide for certain Profit Margins in relation to operating expenses which a taxpayer is required to maintain for certain categories of international transactions that will be taken into consideration as ALP by the Income Tax Authorities. These are amended by a Notification No 46\/2017 dated 07-06-2017 issued by the Ministry of Finance, Central Board of Direct Taxes (CBDT).<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The revised amendments are applicable for three assessment years i.e. Assessment year 2017-18 to 2018-20. However, an additional benefit is extended to the eligible assessee under which for the assessment year 2017-2018 they can choose from the earlier rules or the amended rules whichever is more beneficial to them.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">In order to understand the scope of amendments brought about in Safe Harbour Rules, it is necessary to analyze the below mentioned definitions:<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li>\n<h2><span style=\"font-size: 14pt;\">Who is an eligible assessee?<\/span><\/h2>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The eligible assessee has been defined in Rule 10TB. The eligible assesses are as under,<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">is engaged in providing software development services or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">information technology enabled services or knowledge process outsourcing services,\u00a0with in significant risk, to a non-resident associated enterprises; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">has made any intra-group loan; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">has provided a corporate guarantee; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">is engaged in providing contract research and development services wholly or partly relating to software development,\u00a0with in significant risk, to a foreign principal ; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">is engaged in providing contract research and development services wholly or partly relating to generic pharmaceuticals drugs,\u00a0with in significant risk, to a foreign principal; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">is engaged in manufacture and export of core or non-core auto components and where ninety per cent or more of total turnover during relevant previous year is in nature of original equipment manufacturer sales.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">There are two conditions in relation to Section 10TB which need to be fulfilled in order to derive benefit of these Safe Harbor Rules.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">The assessee who must applies for Safe Harbour Rules must apply in the prescribed format as laid down in the Income Tax Act, 1961.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Only an eligible assessee is entitled to avail the benefits of the Safe Harbour Rules.<\/span><\/li>\n<\/ul>\n<ul style=\"text-align: justify; list-style-type: square;\">\n<li>\n<h2><span style=\"font-size: 14pt;\">Which are the eligible transactions?<\/span><\/h2>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">As per Rule 10TC following class of international transactions between the eligible assessee (as mentioned above) and its associate enterprise were defined as \u201celigible international transaction\u201d for the purpose of Safe Harbour Rules,<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Provision of software development services;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Provision of information technology enabled services;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Provision of Knowledge process outsourcing services;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Advance of intra group loan;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Provision of corporate guarantee,<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">where the amount guaranteed \u2013does not exceed one hundred crore rupees exceeds one hundred crore rupees, and the credit rating of the associated enterprises, done by an agency registered with the Securities and Exchange Board of India, is of adequate to highest safety ;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">provision of contract research and development services wholly or partly relating to software development;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">provision of contract research and development services wholly or partly relating to generic pharmaceuticals drugs;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">manufacture and export of core auto components;<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">manufacture and export of non-core components; or<\/span><\/li>\n<li><span style=\"font-size: 14pt;\"><em>receipt of low value adding intra grouping services from one or more members of its group.<\/em><\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><span style=\"font-size: 14pt;\"><strong><u>The main highlights of the amendment are as follows:<\/u><\/strong><\/span><\/h2>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Moderation of Safe Harbour Rates<\/span><\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td width=\"32\">\n<p><span style=\"font-size: 14pt;\"><strong>Sr<\/strong><\/span><\/p>\n<p><span style=\"font-size: 14pt;\"><strong>No<\/strong><\/span><\/td>\n<td width=\"345\"><span style=\"font-size: 14pt;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<strong>\u00a0\u00a0\u00a0\u00a0 Contract Services<\/strong><\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\"><strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Earlier Rates<\/strong><\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\"><strong>\u00a0\u00a0\u00a0\u00a0\u00a0 Amended Rates<\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"32\"><span style=\"font-size: 14pt;\">1.<\/span><\/td>\n<td width=\"345\"><span style=\"font-size: 14pt;\">Information Technology(IT) and Information Technology Services (ITES)<\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\">Between 20%- 22%<\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\">Between 17%-18%<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"32\"><span style=\"font-size: 14pt;\">2.<\/span><\/td>\n<td width=\"345\"><span style=\"font-size: 14pt;\">Knowledge Process Outsourcing (KPO)<\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\">\u00a025%<\/span><\/td>\n<td width=\"200\">\n<p><span style=\"font-size: 14pt;\">18%, 21% &amp; 24% depending upon the percentage of Employee cost to Operating cost<\/span><\/p>\n<p>&nbsp;<\/td>\n<\/tr>\n<tr>\n<td width=\"32\"><span style=\"font-size: 14pt;\">3.<\/span><\/td>\n<td width=\"345\"><span style=\"font-size: 14pt;\">Research &amp; Development (R&amp;D) service providers for IT &amp; Generic Pharmaceutical drugs<\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\">Between 29%-30%<\/span><\/td>\n<td width=\"200\"><span style=\"font-size: 14pt;\">24%<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Introduction of Threshold of INR 200 crore for IT, ITES, KPO AND R&amp;D on service providers for IT &amp; Generic Pharmaceutical drugs:<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">\u00a0The effect of this amendment for the current year has been neutralized as the assesses have an option to choose from the old rules or the new rules.<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Introduction of Safe Harbour for low value intra group services:<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The scope of the rule has been extended to cover within its ambit the receipt of low value adding intra group services subject to certain requirements like certification from an accountant regarding cost pooling methods, exclusion of share holder cost and duplicate cost from cost pool and reasonableness of allocation keys. These rules are in consonance with the guidelines laid down by Organization of Economic Co-operation and Development (OECD) under Base Erosion and Profit Shifting (BEPS) Action plans 8-10. However there are certain digressions in the definition of low value adding Intra Group Services. An extensive definition of low value adding intra group services has been added to the Income Tax Rule, 1962. There is a list of 10 services which has been excluded from the applicability of the definition including It, ITES, KPO services.<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Safe Harbour Rates for KPO services:<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The Safe Harbour Rates for KPO services have been revamped and made dependent upon the application of Employees cost to operating to operating cost ratio. The term Employees cost has been briefly defined under Safe Harbour Rules.<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">Introduction of Safe Habour Rates for loans advanced in foreign currency:<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The revised Safe Harbour Rules are based on the LIBOR rates as well as the credit rating of the AE granted by CRISIL (Credit Rating Information Services India Limited.).<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">The scope of the definitions of operating expense has been widened to include cost relating to ESOP provided by AE, reimbursement of expenses incurred by AE on behalf of the tax payer ,amount recovered by AE which relate to normal operations of the taxpayer subject to such reimbursements and recoveries being at cost.<\/span><\/li>\n<\/ul>\n<ul style=\"text-align: justify;\">\n<li><span style=\"font-size: 14pt;\">In addition to the above mentioned amendments there are certain other changes like inclusion of definition of accountant, relevant previous year, clarifying the scope of Employee cost etc.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">Operating Profit Margins (in relation to operating expense) are to be maintained by the eligible assessee from the eligible international transactions. Operating profit margins in relation to operating expense are defined under Rule 10TA of Income Tax Rules, 1962 as the ratio of operating profit, being the operating revenue in excess of operating expense, to the operating expense expressed in terms of percentage. These are tabulated as under:-<\/span><\/p>\n<table width=\"936\">\n<tbody>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\"><strong>SR NO<\/strong><\/span><\/td>\n<td width=\"270\"><span style=\"font-size: 14pt;\"><strong>Eligible International Transactions<\/strong><\/span><\/td>\n<td width=\"327\">\n<p><span style=\"font-size: 14pt;\"><strong>Earlier Safe Harbour<\/strong><\/span><\/p>\n<p><span style=\"font-size: 14pt;\"><strong>Margins\/Norms<\/strong><\/span><\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\"><strong>Amended Safe Harbour<\/strong><\/span><\/p>\n<p><span style=\"font-size: 14pt;\"><strong>Margins\/Norms<\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">1.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Provisions of software development services<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC (i)<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\">\n<p><span style=\"font-size: 14pt;\">Not less than 20% where aggregate value of transactions does not exceed a sum of INR 500 Crs.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 22% where aggregate value of transactions exceeds a sum of INR 500 Crs.<\/span><\/p>\n<p>&nbsp;<\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">\u00a0 Not less than 17% where aggregate value of transactions does not exceed a sum of INR 100 Crs<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 18% where the aggregate value of transactions exceeds a sum of INR 200 Crs<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">2.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Provision of information technology enabled services<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC (ii)<\/span><\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\">\n<p><span style=\"font-size: 14pt;\">Not less than 20% where aggregate value of transactions does not exceed a sum of INR 500 Crs.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 22% where aggregate value of transactions exceeds a sum of INR 500 Crs.<\/span><\/p>\n<p>&nbsp;<\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">Not less than 17% where aggregate value of transactions does not exceed a sum of INR 100 Crs.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">\u00a0Not less than 18% where the aggregate value of transactions exceeds a sum of INR 200 Crs<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">3.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Provision of knowledge process outsourcing services (KPO)<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC (iii)<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">Not less than 25%<\/span><\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">Value of transaction does not exceed sum of INR 200 Crs and operating margin is-<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 24% and ratio of Employee cost to operating expense is at least 60%.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 21%and ratio of Employer cost t operating expense is ? 40% but&lt; 60%.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Not less than 18% and ratio of Employee cost to operating expense is &lt;40%.<\/span><\/p>\n<p>&nbsp;<\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">4.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Advancing of IntraGroup Loans.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC (iv)<\/span><\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\">\n<p><span style=\"font-size: 14pt;\">Amount of loan does not:<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">exceed INR 50 Crs Interest rate not less than the base rate of SBI as on 30th June of relevant previous year + 150 basis points.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Amount of loan exceeds:<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">INR 50 Crs Interest rate not less than the base rate of SBI as on 30th June of relevant previous year + 300 basis points.<\/span><\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">INR denominated loan \u2013 Interest rate not less than 1 year marginal cost of funds lending rate of SBI as on 1st April of relevant previous year plus 175\/325\/475\/625 basis points based on the CRISIL credit rating of the AE.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">However, where credit rating of the AE is not available and the amount of loan advanced to the AE including loans to all AEs in INR does not exceed INR 100 Crs as on 31st March of the relevant previous year, then 425 basis points shall be added to the lending rate of SBI as mentioned above.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Foreign currency denominated loan &#8211; Interest rate not less than 6 month London Inter Bank Offer Rate (LIBOR) as on 30th September of relevant previous year plus 150\/300\/450\/600 basis points based on the CRISIL credit rating of the AE.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">However, where credit rating of the AE is not available and the amount of loan advanced to the AE including loans to all AEs in INR does not exceed INR 100 Crs as on 31st March of the relevant previous year, then 400 Basis points shall be added to the 6 month LIBOR as mentioned above.<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">5.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Providing of Corporate Guarantee<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">[Rule 10TC(v)(a) &amp; Rule 10TC(v)(b)]<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\">\n<p><span style=\"font-size: 14pt;\">Guaranteed amount does not exceed INR 100 Crs \u2013 Commission not less than 2% p.a. on the amt guaranteed.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">\u00a0Guaranteed amt exceeds INR 100 Crs &amp; Credit Rating of AE done by an agency registered with SEBI &#8211; Commission not less than 1.75%<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">\u00a0p.a. on the amt. guaranteed.<\/span><\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">Guaranteed amt. does not exceed INR 100 Crs \u2013 Commission not less than 1% p.a. on the amt. guaranteed.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Guaranteed amt. exceeds INR 100 Crs &amp; Credit Rating of AE done by an agency registered with SEBI &#8211; Commission not less than 1% p.a. on the amt. guaranteed.<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">6.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Provision of contract research &amp; development services wholly or partly relating to software development.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC (vi)<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">Not less than 30%<\/span><\/td>\n<td width=\"300\"><span style=\"font-size: 14pt;\">Not less than 24% where the value of international transaction does not exceed a sum of INR 200 Crs<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\">\n<p><span style=\"font-size: 14pt;\">7.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Rule 10TC\u00a0 (vii)<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">Not less than 29%<\/span><\/td>\n<td width=\"300\"><span style=\"font-size: 14pt;\">Not less than 24% where the value of international transaction does not exceed a sum of INR 200 Crs.<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">8.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Manufacture and export of core auto components.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">[Rule 10TC(viii)]<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 12%<\/span><\/td>\n<td width=\"300\"><span style=\"font-size: 14pt;\">No Change<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">9.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Manufacture and export of non-core auto components.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">[Rule 10TC(ix)]<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 8.5 %<\/span><\/td>\n<td width=\"300\"><span style=\"font-size: 14pt;\">No Change<\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"39\"><span style=\"font-size: 14pt;\">10.<\/span><\/td>\n<td width=\"270\">\n<p><span style=\"font-size: 14pt;\">Receipt of low value adding intra-group services.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">\u00a0[Rule 10TC(ix)]<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/td>\n<td width=\"327\"><span style=\"font-size: 14pt;\">Not Applicable<\/span><\/td>\n<td width=\"300\">\n<p><span style=\"font-size: 14pt;\">The value of International transaction including a mark-up not exceeding 5% does not exceed sum of INR 10 Crs.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 14pt;\">Provided that the method of cost pooling, the exclusion of shareholder costs and duplicate costs from the cost pool and the reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas AE, is certified by an accountant.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul style=\"text-align: justify; list-style-type: square;\">\n<li>\n<h2><span style=\"font-size: 14pt;\">Applicability<\/span><\/h2>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">The revised Safe Harbour Rules are only applicable for the Assessment year 2017-18 and two immediately following assessment years i.e. Assessment year 2018-19 and 2019-20. For the Assessment year 2017-18, the tax payers have an option to choose from old rules or new rules which ever are more beneficial.<\/span><\/p>\n<ul style=\"text-align: justify; list-style-type: square;\">\n<li>\n<h2><span style=\"font-size: 14pt;\">Our take on the Amendment<\/span><\/h2>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 14pt;\">We believe that the revised Safe Harbour Rules are focused at bringing in more certainty and reducing litigations in relation to Transfer Pricing. These Safe Harbour Rules are in consonance with guidelines issued by Organization for Economic Co-operation and Development under the Base Erosion and Profit Sharing (BEPS) Action plan 8 to 10. Base Erosion and Profit Sharing (BEPS) Action plan 8 to 10 relates to essential principles of transfer pricing namely how transfer pricing needs to be applied for various transactions or issues relating to intangibles and allocation of risks. However, the definition of low value adding intra group services given under Income tax rules, 1962 differs from that given under the BEPS plan. These new rules are applicable to transactions limited to 200cr which depicts the intention of government to ensure that the benefits of these rules are restricted to small and medium sized enterprises. The quantum of operating margins has been limited upto 24% which were as high as 30% under the previous regime. The benefit of these rules is extended to currency outbound loans and low value-adding intra-group services which is a major step towards expanding the ambit of these rules. Overall, it is welcome amendment and should motivate more entities to go for application of Safe Harbour rules.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction Due to the increasing complexity of transaction between enterprises of the same group and manipulation of prices by them in order to avoid the burden of taxation in relation to international transactions, the Transfer pricing regulations by the Finance Act 2001 were established. Transfer Pricing regulations are applicable in case of all international transaction &#8230; <a title=\"Amendment in Safe Harbour Rules  \u2013 A step towards sanity\" class=\"read-more\" href=\"https:\/\/taxclick.org\/type\/income-tax\/amendment-safe-harbour-rules-step-towards-sanity\/\" aria-label=\"More on Amendment in Safe Harbour Rules  \u2013 A step towards sanity\">Read more<\/a><\/p>\n","protected":false},"author":132,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4],"tags":[471],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Amendment in Safe Harbour Rules<\/title>\n<meta name=\"description\" content=\"\u2022 The term Safe Harbour is defined under section 92CB of the Income Tax Act, 1961 as circumstances under which the authorities shall accept\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/taxclick.org\/type\/income-tax\/amendment-safe-harbour-rules-step-towards-sanity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Amendment in Safe Harbour Rules\" \/>\n<meta property=\"og:description\" content=\"\u2022 The term Safe Harbour is defined under section 92CB of the Income Tax Act, 1961 as circumstances under which the authorities shall accept\" \/>\n<meta property=\"og:url\" content=\"https:\/\/taxclick.org\/type\/income-tax\/amendment-safe-harbour-rules-step-towards-sanity\/\" \/>\n<meta property=\"og:site_name\" content=\"All About Finance\" \/>\n<meta property=\"article:published_time\" content=\"2017-06-17T12:50:21+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-06-24T04:09:13+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/taxclick.org\/wp-content\/uploads\/2017\/06\/IMG-20170617-WA0093-300x194.jpg\" \/>\n<meta name=\"author\" content=\"CA. 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She is author of following books: \u2022 Practical aspects of FDI in India published by Institute of Company secretaries of India \u2022 Due Diligence under Foreign Exchange Management Act, 1999 published by CCH. \u2022 Comprehensive Guide to Foreign Exchange Management in two volumes published by CCH. \u2022 Practitioner's Guide to Foreign Exchange Management published by CCH, a Walter Kluwers company. 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Sudha G. Bhushan","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/taxclick.org\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/28c29881bef174662a6d7b9f54f78605?s=96&d=ANSPRESS_AVATAR_SRC&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/28c29881bef174662a6d7b9f54f78605?s=96&d=ANSPRESS_AVATAR_SRC&r=g","caption":"CA. Sudha G. Bhushan"},"description":"Sudha G. Bhushan is a qualified Chartered Accountant and a Company Secretary with more than a decade of experience in the Foreign Exchange Management Act, RBI, Transfer pricing and International taxation matters. She is an ardent speaker and author. She is Founder Director, Taxpert Professionals Private Limited, a multi-faceted consulting firm. She is author of following books: \u2022 Practical aspects of FDI in India published by Institute of Company secretaries of India \u2022 Due Diligence under Foreign Exchange Management Act, 1999 published by CCH. \u2022 Comprehensive Guide to Foreign Exchange Management in two volumes published by CCH. \u2022 Practitioner's Guide to Foreign Exchange Management published by CCH, a Walter Kluwers company. She is regular contributor journal and website of WIRC, ICAI published monthly.","url":"https:\/\/taxclick.org\/author\/sudha_bhushan\/"}]}},"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"yarpp-thumbnail":false},"uagb_author_info":{"display_name":"CA. Sudha G. Bhushan","author_link":"https:\/\/taxclick.org\/author\/sudha_bhushan\/"},"uagb_comment_info":0,"uagb_excerpt":"Introduction Due to the increasing complexity of transaction between enterprises of the same group and manipulation of prices by them in order to avoid the burden of taxation in relation to international transactions, the Transfer pricing regulations by the Finance Act 2001 were established. Transfer Pricing regulations are applicable in case of all international transaction&hellip;","_links":{"self":[{"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/posts\/3979"}],"collection":[{"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/users\/132"}],"replies":[{"embeddable":true,"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/comments?post=3979"}],"version-history":[{"count":0,"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/posts\/3979\/revisions"}],"wp:attachment":[{"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/media?parent=3979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/categories?post=3979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxclick.org\/wp-json\/wp\/v2\/tags?post=3979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}