The Ministry of Finance’s Central Board of Direct Taxes (CBDT) has issued the Income-tax (Sixth Amendment) Rules, 2025, introducing significant updates to the Income-tax Rules, 1962. These changes focus on expanding the scope and applicability of safe harbour provisions under transfer pricing regulations.

Key highlights include:

1. Inclusion of Lithium-Ion Batteries (Rule 10TA (b) (iii)/(iv)): has been amended to include lithium-ion batteries for use in electric or hybrid electric vehicles as a core auto component. This aims to promote the electric vehicle sector by providing tax certainty for relevant transactions.

RULE 10TA

(b) “core auto components” means,—

(i) engine and engine parts, including piston and piston rings, engine valves and parts cooling systems and parts and power train components;

(ii) transmission and steering parts, including gears, wheels, steering systems, axles and clutches;

(iii) suspension and braking parts, including brake and brake assemblies, brake linings, shock absorbers and leaf springs; or

(iv) lithium ion batteries for use in electric or hybrid electric vehicles.

2. Increase in Safe Harbour Margins: In Rule 10TD, the upper limit for specified international transactions have been raised from two hundred crore to three hundred crore. Categories affected include:

1. Provision of software development services referred to in item (i) of rule 10TC.
2. Provision of information technology enabled services referred to in item (ii) of rule 10TC.
3. Provision of knowledge process outsourcing services referred to in item (iii) of rule 10TC.
4. Provision of contract research and development services wholly or partly relating to software development referred to in item (vi) of rule 10TC.
5. Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs referred to in item (vii) of rule 10TC.

3. Extension of Safe Harbour Period: Rule 10TD(3B) has been updated to extend the safe harbour provisions to assessment years 2025-26 and 2026-27, offering continued benefits and reducing transfer pricing disputes.

4. Clarification on Assessment Year Validity: An amendment to Rule 10TE(2) specifies that the applicability of certain safe harbour benefits is limited to one assessment year, eliminating ambiguity regarding their duration.

These amendments reflect the government’s commitment to supporting sustainable technologies, encouraging investment, and simplifying compliance for international transactions.