CBDT notifies Amendment to Rules 10TA and 10TD of Income Tax Rules, impact on Safe Harbour Rules [Read Notification]

The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Twenty-Ninth Amendment) Rules, 2023, to amend Rules 10TA and 10TD, pertaining to Safe Harbour in Transfer Pricing Regulations.

The notification stated as follows: –

“(1) These rules may be called the Income-tax (Twenty-Ninth Amendment) Rules, 2023.

(2) Save as otherwise provided in these rules, they shall come into force from the 1st day of April, 2024.

2. In the Income-tax Rules, 1962,–

(a) in rule 10TA, with effect from the date of publication of this notification in the Official Gazette,—

(i) for clause (f), the following clause shall be substituted, namely:-

‘(f) “intra-group loan” means loan advanced to an associated enterprise being a non-resident, where the loan—

(i) is not advanced by an enterprise, being a financial company including a bank or a financial institution or an enterprise engaged in lending or borrowing in the normal course of business; and

(ii) does not include credit line or any other loan facility which has no fixed term for repayment;’;

(ii) in clause (j), for sub-clause (vi), the following sub-clause shall be substituted, namely:-

“(vi) loss on transfer of assets or investments other than assets, on which depreciation is included in the operating expense;”;

(iii) in clause (k), for sub-clause (iii), the following sub-clause shall be substituted, namely:-

“(iii) income on transfer of assets or investments other than assets, on which depreciation is included in the operating expense;”;

(b) in rule 10TD,—

(i) in sub-rule (2A), in the Table—

(A) in Sl.No. 4, in column number (3),–

(I) in clause (i), the word “CRISIL” shall be omitted;

(II) in clause (ii), the word “CRISIL” shall be omitted;

(III) in clause (iii), the word “CRISIL” shall be omitted;

(IV) in clause (iv), the word “CRISIL” shall be omitted;

(B) for Sl.No. 5 and the entries relating thereto, the following serial number and entries shall be

substituted, namely:-

5. Advancing of intra-group loans referred to in clause (iv) of rule 10TC where the amount of loan is denominated in foreign currency.

“The interest rate declared in relation to the eligible international transaction is not less than the reference rate of the relevant foreign currency as on 30th September of the relevant previous year plus, -

(a) If amount of loan advanced to the associated enterprise including loans to all associated enterprises does not exceed a sum equivalent to two hundred and fifty crore Indian rupees in the aggregate as on 31st March of the relevant previous year:

(i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent;

(ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent;

(iii) 400 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B-, C+, C , C-, D or equivalent or where the credit rating of the associated enterprise is not available;

(b) If amount of loan advanced to the associated enterprise including loans to all associated enterprises exceeds a sum equivalent to two hundred and fifty crore Indian rupees in the aggregate as on 31st March of the relevant previous year:

(i) 150 basis points, where the associated enterprise has a credit rating of AAA, AA+, AA, AA-, A+, A, A- or equivalent;

(ii) 300 basis points, where the associated enterprise has credit rating of BBB+, BBB, BBB- or equivalent;

(iii) 450 basis points, where the associated enterprise has a credit rating of BB+, BB, BB-, B+, B, B- or equivalent;

(iv) 600 basis points, where the associated enterprise has credit rating of C+, C , C-, D or equivalent or where the credit rating of the associated enterprise is not available.”;

1. Clause (f) has been modified to redefine "intra-group loan" as a loan advanced to a non-resident associated enterprise. The loan must not be extended by a financial company, including banks, or entities engaged in lending or borrowing in the regular course of business. Additionally, it excludes credit lines or loans without fixed repayment terms.

Earlier, it the provision was as stated below —

“intra‐group loan” means loan advanced to wholly owned subsidiary being a non‐ resident, where the loan– (i)   is sourced in Indian rupees; 4 (ii) is not advanced by an enterprise,  being a financial company including  a bank or a  financial institution or an enterprise engaged in lending or borrowing in the normal course of business; and (iii) does not include credit line or any other loan facility which has no fixed term for repayment;”

2. Substantial modifications have been made in clauses (j) and (k) concerning loss and income on the transfer of assets or investments. These changes refine the criteria for assessing financial transactions and their impact on tax liabilities.

(ii) after sub-rule (2A), the following Explanation shall be inserted, namely:-

‘Explanation.– For the purposes of this sub-rule,—

(a) “reference rate” means,–

(i) for US dollar, 6-month Term Secured Overnight Financing rate (SOFR), currently

administered by Chicago Mercantile Exchange (CME), as increased by 45 basis points;

(ii) for Euro, 6-month Euro Inter Bank Offered Rate (EURIBOR), currently administered by

European Money Markets Institute;

(iii) for UK Pound Sterling, 6-month Term Sterling Overnight Index Average (SONIA),

currently administered by ICE Benchmark Administration/Refinitiv, as increased by 30

basis points;

(iv) for Japanese Yen, 6-month Tokyo Term Risk Free Rate (TORF), currently benchmarked by

QUICK Benchmarks Inc, as increased by 10 basis points;

(v) for Australian dollar, 6-month Bank Bill Swap Rates (BBSW) currently administered by

Australian Securities Exchange; and

(vi) for Singapore dollar, 6-month Compounded Singapore Overnight Rate Average (SORA),

currently administered by Monetary Authority of Singapore, as increased by 45 basis

points;

(b) “credit rating” means the credit rating assigned to the associated enterprise by a Securities and

Exchange Board of India registered and Reserve Bank of India accredited credit rating agency which

is applicable for the relevant previous year, so however that-

(i) where the associated enterprise has only one credit rating, then such rating shall be taken as

its credit rating; and

(ii) where the associated enterprise has a credit rating from more than one such credit rating

agency, then the least of such ratings shall be taken as its credit rating.’

To Read the full text of the Order CLICK HERE

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