CBDT: No change in Safe Harbour Rules for AY 2020-21

The Central Board of Direct Taxes (CBDT) vide a Notification dated 20th May 2020 has issued the Income-tax (9th Amendment) Rules, 2020 and has notified changes to Rules 10TD and 10TE of Income Tax Rules relating to Safe Harbour Rules. The Notification provides that the safe harbour rules and the margins issued in 2017 shall remain unchanged and will continue for the assessment year of 2020-21. The amendment is effective from the 1st April 2020.


The Government of India introduced the concept of Safe Harbour Rules (SHR) in Finance Act 2009. Safe harbours apply for transfer pricing purposes in the context of cross-border transactions. The SHRs establish the parameters under which the Indian tax authorities accepts the transfer price automatically and generally will not challenge a transfer price declared by a taxpayer. It aims to provide an element of certainty to taxpayers. As per the current amendment, the option for safe harbour provided under Rule 10TD of the Income-tax Rules, 1962, shall be invoked for international transactions for the assessment year 2020-21.

This means that existing Safe Harbour margins will be applicable on transactions at 18%  in software development services, information technology-enabled services (ITeS); 24%, 21% and 18%  for knowledge processing outsourcing (KPO), and 24% for contract research and development services including those relating to generic pharmaceutical drugs.

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