Income Tax department notifies safe harbour rates for fiscal year 2019-20
The income tax department has notified the 'safe harbour' rates for 2019-20 fiscal for calculation of transfer pricing by foreign companies in India.
The Central Board of Direct Taxes (CBDT) has notified changes to Rules 10TD and 10TE of Income Tax Rules relating to Safe Harbour Rules. It said rates applicable from Assessment Year (AY) 2017-18 to 2019-20 will continue to apply for AY 2020-21.
Transfer pricing implies the prices at which various overseas divisions of a company transact with each other. Generally, safe harbour is defined as circumstances in which the tax authority shall accept the transfer price declared by the taxpayer to be at arm's length.
Following the best practices of international tax jurisdiction, the Indian government introduced the concept of Safe Harbour Rules (SHR) in Finance Act 2009. Post that, the first round of SHR provisions were introduced in August 2013 for a period of three years, followed by revision in 2017 in the SHR which was applicable till financial year 2019-20.
Different rates were prescribed for different category of international transactions. Of these, the category of software development, ITeS and KPO were popularly opted for.