The Indian government has made changes to tax rules that will benefit electric vehicle (EV) manufacturers and importers. The Central Board of Direct Taxes (CBDT) has increased the safe harbour limit from ₹200 crore to ₹300 crore and included lithium-ion batteries used in EVs under these rules.
What is Safe Harbour?
Safe harbour rules, under the Income-tax Act, allow businesses to declare their transfer price (the price charged between related companies in multinational groups) without facing strict scrutiny from tax authorities. This helps reduce tax disputes and provides more certainty for businesses.
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How Will These Changes Help?
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Less Tax Disputes: Since lithium-ion batteries for EVs are now considered core auto components, companies importing these will have fewer transfer pricing issues.
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Higher Limit: Companies with transactions up to ₹300 crore can now benefit from safe harbour provisions.
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Tax Certainty: Businesses that choose safe harbour will have clarity on their tax obligations, avoiding lengthy legal disputes.
These changes will apply for two assessment years—2025-26 and 2026-27. Experts believe this will encourage investment in the EV sector and support India’s push for clean energy transportation.
