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CBDT notifies Safe Harbor Rules for AY 2020-21

Blog: NASSCOM Official Blog

Central Board of Direct Taxes (CBDT), vide issue of Income Tax (9th Amendment) Rules, 2020  has notified Safe Harbor Rules (SHR) for Assessment Year (AY) 2020-21. As per the notification, rates applicable from AY 2017-18 to 2019-20 will continue to apply for AY 2020-21.

Introduced in 2009, safe harbors provide for circumstances in which a certain category of taxpayers can follow a simple set of rules and rates under which transfer prices that are aligned to such rules are automatically accepted by the revenue authorities. It aims to provide an element of certainty to taxpayers. A safe harbor regime will, in particular, benefit taxpayers in the services sector by adopting a transfer pricing mark-up at the rate prescribed to avoid protracted litigation.

Post 2009, first round of SHR provisions were introduced in August 2013 for a period of 3 years, followed by revision in 2017 in the SHR which were applicable till Financial Year (FY) 2019.

This is a welcome move and in line with NASSCOM’s recommendation as part of Pre-Budget Memorandum submitted to Ministry of Finance in December 2019.

In the past, SHR have been notified for more than one year, normally for three years at a stretch. However, considering the impact of COVID-19 on business for FY 2020-21, it appears that the government has decided to announce only for one year, ie limited to FY 2019-20. We expect the government to rationalise the rate under SHR for FY 2020-21. This would go a long way in making this scheme more attractive for the taxpayers at large and provide tax certainty to business on the crucial aspect of transfer pricing.

Copy of the notification is attached for your reference.

We will keep you posted on further developments in this regard.

The post CBDT notifies Safe Harbor Rules for AY 2020-21 appeared first on NASSCOM Community |The Official Community of Indian IT Industry.

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