Who is an ‘Accountant’ for Purpose of Safe Harbour Rules? Income Tax Draft Rules provides Clarity

The Income Tax Draft Rules have clarified on who qualifies as an “accountant” for the purposes of Safe Harbour Rules, especially for the purposes of Rules 87 to 93.

Under the Draft Rules, an “accountant” means a person referred to in section 515(3)(b) of the Income Tax Act, 2025 who satisfies prescribed qualification benchmarks.

The professional must be practicing individually or acting as a valuer, two conditions must be met:

First, the person must possess not less than ten years of professional experience in accountancy or valuation; and

Second, the individual’s annual professional receipts in the financial year preceding the year in which the cost certification is undertaken must exceed ₹50 lakhs.

In cases where the professional is a member or partner of an entity engaged in rendering accountancy or valuation services, the threshold shifts from the individual to the firm or entity, whose annual receipts in the immediately preceding year must exceed ₹3 crores.

The Draft Rules also extend recognition to certain foreign professionals for cross-border safe harbour and transfer pricing situations.

The definition includes any person who is recognised by the Government of the country in which the associated enterprise is registered or incorporated or has authorised agencies for undertaking cost certification.

However, such foreign-recognised professionals must also broadly satisfy the core eligibility conditions relating to experience and receipt thresholds. Further, where such a person is associated with an entity rendering accountancy or valuation services, the entity or its affiliates must have a presence in more than two countries.

Verbatim of ‘Accountant’ definition for the Purpose ‘Safe Harbour Rules’

As per the definition provided for Safe Harbour Rules for international transactions, accountant is :

“ (a) Accountant -

(A) means an accountant referred to in section 515(3)(b) of the Act, who fulfils the following conditions, namely: -

(i) if he is pursuing the profession of accountancy individually or is a valuer then-

• he has professional experience of not less than ten years; and

• his annual receipt in the year preceding the year in which cost certification is undertaken, from the exercise of profession, exceeds Rs. 50 lakhs;

(ii) if he is a member or partner in any entity engaged in rendering accountancy or valuation services then, the annual receipt of the entity in the year preceding the year in which cost certification is undertaken exceeds Rs. 3 crores;

(B) includes any person recognised for undertaking cost certification by the Government of the country where the associated enterprise is registered or incorporated or any of its agencies, who fulfils the following conditions, namely:

(i) the condition referred to in (a)(A)(i) and (i1);

(ii) if he is a member or partner in any entity engaged in rendering accountancy or valuation services then, the entity or its affiliates have presence in more than two countries;”

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates