Section 92CB: Safe Harbour Rules and CBDT Powers

Section 92CB of the Income-tax Act, 1961 authorises the Central Board of Direct Taxes (CBDT) to frame safe harbour rules that provide tax certainty for qualifying transfer pricing arrangements and certain income deemed to accrue or arise in India. From 1 April 2026, the corresponding provision is Section 167 of the Income-tax Act, 2025.

Meaning of safe harbour

A safe harbour is a legally prescribed set of circumstances in which the income-tax authorities must accept the declared transfer price or qualifying deemed income when the taxpayer meets the conditions. It is not a blanket exemption from tax, documentation or reporting.

Section 92CB of the Income-tax Act, 1961 - explained

Sub-section (1): Scope

The determination of (a) income referred to in Section 9(1)(i), or (b) arm's length price under Section 92C or 92CA, is subject to safe harbour rules. The earlier version reproduced in the source webpage addressed only arm's length pricing; the later statutory text also covers specified deemed income.

Sub-section (2): CBDT rule-making power

The Board may prescribe the circumstances, qualifying transactions, eligibility thresholds, pricing conditions and procedures under the safe harbour framework.

Statutory explanation

For this section, safe harbour means circumstances in which income-tax authorities accept the transfer price or the income deemed to accrue or arise under Section 9(1)(i), as applicable, declared by the assessee.

Section 167 of the Income-tax Act, 2025

Section 167 carries forward the CBDT's power to make safe harbour rules. It applies to the determination of income referred to in Section 9(2) and arm's length price under Sections 165 and 166. Its sub-section (3) defines safe harbour in terms of acceptance of the taxpayer's declared transfer price or qualifying deemed income.

The Income-tax Department identifies Rules 86 to 102 of the Income-tax Rules, 2026 and Form 49 for opting into the safe harbour mechanism under Section 167. The form consolidates the earlier Forms 3CEFA, 3CEFB and 3CEFC.

Rules and eligible transactions

Under the 1961 Act framework, the Income Tax Department describes Rules 10TA to 10TG for international transactions and Rules 10TH to 10THD for specified domestic transactions. Different categories of transactions may have different margins, thresholds and conditions. For the newer regime, consult Rules 86 to 102 of the Income-tax Rules, 2026 and the current Form 49 instructions.

Eligible categories under notified rules have included certain information technology and IT-enabled services, contract research and development, intra-group financing or guarantees, and specified manufacturing-related transactions. Eligibility must be checked against the actual rule and tax year; merely falling within a broad industry is insufficient.

Important CBDT update for assessment years 2025-26 and 2026-27

In its press release dated 25 March 2025, CBDT announced an increase in the relevant safe harbour threshold from Rs. 200 crore to Rs. 300 crore and inclusion of lithium-ion batteries for electric or hybrid electric vehicles within the definition of core auto components. The stated applicability was assessment years 2025-26 and 2026-27. These changes should not be assumed to apply automatically to other tax years or transaction categories.

How to opt for safe harbour

1. Identify the relevant tax year, statute and applicable safe harbour rule.
2. Confirm transaction eligibility, limits, prescribed margins or rates and other conditions.
3. Maintain agreements, invoices, functional analysis, transaction calculations and supporting records.
4. Submit the prescribed application or election form by the applicable deadline: historically Forms 3CEFA or 3CEFB, and under the 2025 Act the consolidated Form 49, as applicable.
5. Meet continuing reporting and transfer pricing obligations and retain evidence of compliance.

Illustrative example

An Indian company provides qualifying software development services to its overseas associated enterprise. If the company meets the applicable turnover limit, operating-margin condition, election procedure and other requirements for that tax year, the declared transfer price may be accepted under the relevant safe harbour rule. The example does not prescribe a universal margin: actual rates vary by transaction type and year.

Safe harbour and advance pricing agreements

Safe harbour applies standardised, notified conditions to qualifying taxpayers. An advance pricing agreement (APA) under Section 92CC of the 1961 Act or Section 168 of the 2025 Act is a separately negotiated arrangement with its own statutory requirements. Businesses should compare eligibility, certainty, transaction coverage and administrative costs before selecting an approach.

Frequently asked questions

Official legislation and guidance

• Income Tax Department: Section 92CB statutory text
• Income-tax Act, 2025 - official PDF (Section 167)
• Income Tax Department: transfer pricing and safe harbour guidance
• CBDT press release dated 25 March 2025
• Income Tax Department: Form 49 safe harbour FAQs

This article is a general explanation. Statutory provisions, notifications, rules and prescribed forms applicable to the relevant tax year govern in case of any difference.