Li-ion batteries under safe harbour rules; threshold raised to Rs 300 cr

Mar 25, 2025

These changes for businesses engaged in international transactions will apply to assessment years 2025-26 and 2026-27

The Central Board of Direct Taxes (CBDT) has expanded the scope of Safe Harbour Rules by including lithium-ion batteries used in electric and hybrid vehicles under the definition of core auto components, according to a notification.

Safe Harbour Rules is a framework that grants businesses immunity from detailed tax scrutiny if they comply with predefined pricing norms — under the income-tax Rules, 1962.

Additionally, the threshold for availing safe harbour has been increased from Rs 200-300 crore. These changes, for businesses engaged in international transactions, will apply to assessment years 2025-26 and 2026-27.

“An entire ecosystem is being set up for manufacturing EVs in India. In this Budget, the FM had announced a complete exemption of customs duty on many capital goods for manufacturing Li-ion batteries in India. Now, by bringing the already manufactured Li-ion batteries clearly under safe harbour as an “auto-component”, the Income Tax disputes on the import of Li-ion batteries are also going to reach certainty to some extent. This will boost the EV industry in India,” Vivek Jalan, partner at Tax Connect Advisory Services, said.

[The Business Standard]