The Central Board of Direct Taxes (CBDT) has expanded the Safe Harbour Rules to include lithium-ion batteries used in electric and hybrid vehicles as core auto components. This inclusion allows businesses engaged in international transactions involving these batteries to benefit from simplified tax compliance. Additionally, the threshold for availing safe harbour has been increased from Rs 200 crore to Rs 300 crore. These changes will apply to assessment years 2025-26 and 2026-27.
This move aligns with the government’s efforts to promote electric vehicle (EV) manufacturing in India. He highlighted that the recent Budget exempted customs duty on various capital goods for manufacturing lithium-ion batteries domestically. By categorizing these batteries as auto components under safe harbour, potential income tax disputes related to their import may be reduced, thereby boosting the EV industry in India.
Safe Harbour Rules provide businesses with immunity from detailed tax scrutiny if they adhere to predefined pricing norms under the Income-tax Rules, 1962. The recent amendments aim to foster a more conducive environment for EV manufacturing and related sectors in India.