Flash Alert: CBDT Extends Safe Harbour Rules to AY 2024-25 and Introduces Provisions for Foreign Diamond Traders

CBDT Extends Safe Harbour Rules to AY 2024-25 and Introduces Provisions for Foreign Diamond Traders

Background

The Central Board of Direct Taxes (‘CBDT’) has issued Notification No. 124/2024 dated November 29, 2024 for the following:

To amend Rule 10TD of the Income-tax Rules, 1962 (‘the Rules’) to extend the applicability of existing Safe Harbour Rules (‘SHR’) to AY 2024-25 (i.e., FY 2023-24); and
To introduce new Rules 10TI, 10TIA, 10TIB, and 10TIC to provide SHR for Foreign Companies engaged in the business of selling raw diamonds from a special notified zone.

The amended Rule 10TD and newly introduced SHR will be effective retrospectively from April 01, 2024 (i.e., AY 2024-25).

Summary of the newly introduced SHR (Rules 10TI to 10TIC)

Sr. No.	Term	Definition
1	Eligible Assessee	A foreign company engaged in diamond mining and opts for the SHR
2	Eligible Business	Business of selling raw diamonds in a notified special zone[1]
3	Gross Receipts	Aggregate of amount paid or payable to (and received or deemed to be received by) eligible Assessee or any person on his behalf on account of sale of raw diamonds by such eligible Assessee
4	Relevant PY	Previous year (‘PY’) relevant to AY in which new SHR is opted.
5	Raw Diamonds	Diamonds that are Uncut or Unpolished, Unassorted, Unworked or simply sawn/cleaved/bruted, Non-conflict diamonds as defined by the Kimberley process, etc.

Profits from the eligible business chargeable under the head PGBP = Minimum of 4% of the gross receipts derived from the eligible business.

Eligible Assessee to exercise the option by filing Form No. 3CEFC before furnishing ITR for relevant PY.
Option should not be declared invalid by AO.
No further deduction for expenses allowed under sections 30 to 38 of the Income-tax Act, 1961 (‘the Act’).
No carry forward and set off allowed for unabsorbed depreciation and business loss.
Provisions for Transfer Pricing Documentation and filing of Form No. 3CEB applicable w.r.t international transaction between Associated Enterprises.
Foreign Companies opting for SHR are not eligible to invoke Mutual Agreement Procedure.

[1] As referred to in Explanation 1(e) to section 9(1)(i) of the Act.