CBDT has extended the applicability of Safe Harbour Rules to AY 2021-22. Rates remains unchanged. Retrospective effect from 01 April 2021.
An option for Multinational Enterprises to avoid potential transfer pricing litigation by adopting the rates prescribed in Safe Harbour Rules, if satisfying the prescribed criteria.
A change was expected in the rates or thresholds or transactions amidst the pandemic situation but nevertheless something is better than nothing.
To read the Notification CLICK HERE.
Safe Harbour Rules are covered under Rule 10TD of the Income tax rules.
“Safe harbour refers to a legal provision to reduce or eliminate liability in certain situations as long as certain conditions are met.”
Businesses thrive on certainty and safe-harbour offers just that. A safe harbour is a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. To put in differently, from the perspective of Transfer Pricing (‘TP’) provisions the SHR provides a window for the taxpayers wherein in case of defined circumstances the income-tax authorities shall accept the TP declared by the taxpayer.
Safe harbours provide for circumstances in which a certain category of taxpayers can follow a simple set of rules under which transfer prices are automatically accepted by the revenue authorities. Safe harbour provisions offer essentially benefits to taxpayers and tax administrators with benefits of compliance relief, administrative simplicity and certainty.
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