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Rule 10TD of Income Tax Rules 1962: Safe Harbour

Rule 10TD - Safe Harbour
(Safe Harbour Rules for International Transactions)

(1) Where an eligible assessee has entered into an eligible international transaction and the option exercised by the said assessee is not held to be invalid under rule 10TE, the transfer price declared by the assessee in respect of such transaction shall be accepted by the income-tax authorities, if it is in accordance with the circumstances as specified in sub-rule (2).

(2) The circumstances referred to in sub-rule (1) in respect of the eligible international transaction specified in column (2) of the Table below shall be as specified in the corresponding entry in column (3) of the said Table:—

Sl. No.
Eligible International Transaction
Circumstances
(1)
(2)
(3)
1.
Provision of software development services referred to in item (i) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is -
(i) not less than 20 per cent, where the aggregate value of such transactions entered into during the previous year does not exceed a sum of five hundred crore rupees; or
(ii) not less than 22 per cent, where the aggregate value of such transactions entered into during the previous year exceeds a sum of five hundred crore rupees.
2.
Provision of information technology enabled services referred to in item (ii) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is -
 (i)  not less than 20 per cent, where the aggregate value of such transactions entered into during the previous year does not exceed a sum of five hundred crore rupees; or
(ii) not less than 22 per cent, where the aggregate value of such transactions entered into during the previous year exceeds a sum of five hundred crore rupees.
3.
Provision of knowledge process outsourcing services referred to in item (iii) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 25 per cent.
4.
Advancing of intra-group loans referred to in item (iv) of rule 10TC where the amount of loan does not exceed fifty crore rupees.
The Interest rate declared in relation to the eligible international transaction is not less than the base rate of State Bank of India as on 30th June of the relevant previous year plus 150 basis points.
5.
Advancing of intra-group loans referred to in item (iv) of rule 10TC where the amount of loan exceeds fifty crore rupees.
The Interest rate declared in relation to the eligible international transaction is not less than the base rate of State Bank of India as on 30th June of the relevant previous year plus 300 basis points.
6.
Providing corporate guarantee referred to in sub-item (a) of item (v) of rule 10TC.
The commission or fee declared in relation to the eligible international transaction is at the rate not less than 2 per cent per annum on the amount guaranteed.
7.
Providing corporate guarantee referred to in sub-item (b) of item (v) of rule 10TC.
The commission or fee declared in relation to the eligible international transaction is at the rate not less than 1.75 per cent. per annum on the amount guaranteed.
8.
Provision of contract research and development services wholly or partly relating to software development referred to in item (vi) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is not less than 30 per cent.
9.
Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs referred to in item (vii) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is not less than 29 per cent.
10.
Manufacture and export of core auto components referred to in item (viii) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 12 per cent.
11.
Manufacture and export of non-core auto components referred to in item (ix) of rule 10TC.
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 per cent.

(3) The provisions of sub‐rules (1) and (2) shall apply for the assessment year 2013-14 and four assessment years immediately following that assessment year.

(4) No comparability adjustment and allowance under the second proviso to sub-section (2) of section 92C shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and (2) above.

(5) The provisions of sections 92D and 92E in respect of an international transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction.




Extra Notes for Readers:

- Rule 10TD was introduced by the Income Tax (16th Amendment) Rules, 2013, w.e.f. 18-Sep-2013



Reference/Source: Check at Income Tax site for latest version of the Rules - link

This page was last updated on 17th October 2016.
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