Safe Harbour Sys. Rate Unchanged 2020-2021

The Safe Harbour Framework rate remains unchanged for the assessment year 2020-2021. The appeal for a rate reduction by Covid-19 pandemic hit industries has been refused.

Safe Harbour Rules issued back in 2017 will be applying for the ongoing assessment year 2020-2021. The Central Board of Direct Taxes (CBDT) notified on May 20, 2020.

The board said, ” These rules also known as Income Tax Rules 2020 will be considered to come into force since April 1st,2020. Margins that come into force in 2017 will remain the same for the current assessment year 2020-2021.

What is The Rate Structure As Per The Industry?

The tax rate structure for Software development services, Knowledge processing outsourcing (KPO), Information technology-enabled services (ITeS), Development Service ( including generic pharmaceutical drugs), and contract research rate will be the same with the cap of transactions limit to Rs 200 Cr.

The existing rate will be applying for all mentioned services and industries with a transaction limit of Rs 200 Crore.

What’s Service Transaction Rate?

For transaction services related to software development and information technology, the safe harbour rate will be the same i.e., 18%. Whereas for development services (including generic pharmaceutical drugs) and contract research, the safe harbour rate will be 24%.

KPO service transactions rate of 24%, 21%, and 18% will remain the same based on employee cost to operating cost ratio.

Taxpayers have to apply by October 31st,2020 who are looking forward to safe harbour rules. Tax experts said that India should have made tax rules more attractive by the lowered tax rates for the industries pitching under lockdown and Covid-19 impact.

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