Income Tax Update: Form 3CEFC Enabled for Filing, Here’s What You Need to Know

The Income Tax Department has enabled the income tax E-form 3CEFC for filing in the E-filing portal. This is introduced through the notification G.S.R. 739(E) dated 29th November 2024 for the foreign companies engaged in the business of diamond mining.

It is an application form for opting for safe harbour for income referred to in clause (i) of sub-section (1) of section 9 chargeable to tax under the head “Profits and gains of business or profession. The application shall be verified by the person authorised to verify the return of income under section 140 the Income Tax Act, 1961.

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The Ministry of Finance amended the Income-tax Rules which is known as Income-tax (Tenth Amendment) Rules, 2024.  The Rule 10TIA(1) serves as the basis for the form 3CEFC. The sub-rule (1) of the Rule 10TIA states that “The income-tax authorities shall accept the option for safe harbour exercised by an eligible assessee in any relevant previous year under rule 10TIB, where the income declared by such assessee from an eligible business is in accordance with the circumstances as specified in sub-rule (2), unless such safe harbour is declared invalid under the provisions of sub-rule (3) of rule 10TIB.”

What is safe Harbour under Section 92CB of Income Tax Act

According to Section 92CB, “safe harbour” means circumstances in which the income-tax authorities shall accept the transfer price declared by the assessee. Thus, through filing this form, the company can opt for safe harbour.

Details to be Provided in the Form 3CEFC

The details to be provided in the form are as follows:

• Full name of the assessee
• Permanent Account Number
• Address of the assessee
• Nature of business or activities of the assessee
• Status
• Assessment Year

Who is Eligible to File

The eligible assessee as per the notification means a foreign company engaged in the business of diamond mining which has exercised an option for application of safe harbour rules in accordance with rule 10TIA and the “eligible business” means a business of selling raw diamonds in any notified special zone as referred to in clause (e) of Explanation 1 to clause (i) of sub-section (1) of section 9.

The assessee must show whether they are eligible to file the form. That is :

1. Whether the assessee is an eligible assessee as referred to in clause (a) of rule 10TI
2. Whether the assessee is carrying on the eligible business of selling of raw diamonds as referred to in clause (b) of rule 10TI

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If both are yes, then the assessee to fill out the following details:

• Description of the eligible business.
• Gross receipts of the eligible business
• 4% of the gross receipts referred to in item (b) above
• Whether the assessee is carrying on any other business other than the eligible business of selling of raw diamonds
• If reply to item (d) referred above is yes, description of such other business(es)
• Profits of such other business chargeable to tax under the head “Profits and gains of business or profession”

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