Income-tax Rule 89 — Acceptable safe-harbour margins and rates

Safe harbour for eligible international transactions. 89. (1) The transfer price declared by an eligible assessee in respect of an eligible international transaction for a tax year shall be accepted by the income-tax authorities, if— (a) the option exercised by the said assessee is not held to be invalid under rule 90; and (b) it is in accordance with the circumstances as specified in sub-rule (2). (2) The circumstances for each eligible international transaction are, among others: for provision of information technology services, an operating profit margin not less than 15.5% with aggregate operating revenue not exceeding two thousand crore rupees; for advancing intra-group loans in Indian rupees, an interest rate not less than the one-year marginal cost of funds lending rate of the State Bank of India as on 1st April plus a specified spread depending on the associated enterprise's credit rating (ranging from 175 basis points for AAA-A rated loans up to 625 basis points for C-D rated loans, or 425 basis points where unrated and the aggregate loan does not exceed one hundred crore rupees); for intra-group loans in foreign currency, the reference rate plus a specified spread depending on rating and loan size; for providing a corporate guarantee, a commission or fee not less than 1% per annum on the amount guaranteed; for contract research and development services relating to generic pharmaceutical drugs, an operating profit margin not less than 24% with aggregate operating revenue not exceeding three hundred crore rupees; for manufacture and export of core auto components, an operating profit margin not less than 12%; for non-core auto components, not less than 8.5%; for receipt of low value-adding intra-group services, an aggregate mark-up not exceeding 5% and the aggregate amount not exceeding ten crore rupees, using a cost-pooling method that excludes shareholder costs, with allocation-key reasonableness certified by an accountant; and for data centre services, an operating profit margin not less than 15%. (3) For the purposes of this rule— (a) "reference rate" means, for each specified foreign currency, a named 6-month benchmark rate (for example, Term SOFR for US Dollar, EURIBOR for Euro, SONIA for UK Pound Sterling, TORF for Japanese Yen, BBSW for Australian Dollar, and SORA for Singapore Dollar), in each case increased by a specified number of basis points as set out against that currency; (b) "credit rating" means the credit rating assigned to the associated enterprise by a SEBI-registered and RBI-accredited credit rating agency applicable for the relevant tax year; where the associated enterprise has ratings from more than one such agency, the least of such ratings is taken. (4) The provisions of sub-rules (1) and (2) shall apply for a block period of three tax years commencing from the tax year 2026-2027, and shall continue to apply for subsequent block periods unless modified. (5) No comparability adjustment and allowance under section 165(3)(a)(ii) shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and (2). (6) The provisions of sections 171 and 172 in respect of an international transaction shall apply irrespective of the fact that the assessee exercises the safe harbour option for such transaction.