Safe harbour for eligible international transactions

The rule (sub-rule 1). The declared transfer price is accepted if the option has not been held invalid under rule 90 and it is in accordance with the circumstances in the Table (sub-rule 2).

What the Table sets, by transaction.

• IT services, generic pharmaceutical R&D services, core and non-core auto components, and data centre services: a minimum operating profit margin on operating expense, with an aggregate operating revenue ceiling stated for IT services and for generic pharmaceutical R&D services.
• Intra-group loans in rupees: an interest rate not less than the State Bank of India's one-year marginal cost of funds lending rate on 1 April of the relevant tax year plus a margin that depends on the associated enterprise's credit rating, with a separate margin where no rating is available and the loans in aggregate do not exceed a stated amount.
• Intra-group loans in foreign currency: an interest rate not less than the reference rate of the currency on 30 September of the relevant tax year plus a margin that depends on the credit rating and on whether loans in aggregate exceed a stated amount.
• Corporate guarantees: a commission or fee not less than a stated percentage per annum of the amount guaranteed.
• Low value-adding intra-group services: the aggregate amount, including a mark-up not exceeding a stated percentage, does not exceed a stated sum, and an accountant certifies the method of cost pooling, the exclusion of shareholder and duplicate costs, and the reasonableness of allocation keys.

The percentages, basis points and amounts are in the Table of rule 89(2) and are not restated here.

Meanings (sub-rule 3). The "reference rate" is defined for the US dollar, Euro, UK pound sterling, Japanese yen, Australian dollar and Singapore dollar by a named six-month benchmark rate, with a stated addition for some currencies. "Credit rating" is the rating by a SEBI-registered and RBI-accredited agency applicable for the relevant tax year; where the enterprise has more than one rating, the least is taken.

Duration and effect (sub-rules 4 to 6). Sub-rules (1) and (2) apply for a block period of three tax years commencing from tax year 2026-27 and for later blocks unless modified. No comparability adjustment or allowance under section 165(3)(a)(ii) is made to a transfer price accepted under them. Sections 171 and 172 (documentation and accountant's report) still apply even where the safe harbour is chosen.