No MAP relief for taxpayers using safe harbor rules: CBDT | Today’s news

New Delhi: According to the updated Central Board of Direct Taxes (CBDT) guidelines on cross-border tax disputes, taxpayers who have availed the safe harbor provisions for specific international transactions cannot seek further relief under the mutual agreement procedure (MAP).

The apex direct tax policy-making body under the finance ministry also clarified in its 22-page guidelines how disputes will be resolved when the same tax matters are resolved through national appeals, preliminary rulings and settlement systems.

MAP is the dispute resolution mechanism under India’s Double Taxation Agreements (DTAAs). It allows taxpayers to request intervention from the competent authorities of two countries if a tax measure leads or could lead to taxation contrary to an applicable treaty or double taxation. Such disputes typically involve transfer pricing adjustments, determination of permanent establishment and attribution of profits to overseas operations.

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The updated guidance is important as India expands its network of free trade agreements (FTA), after signing trade agreements with the United Kingdom, Oman and New Zealand, in addition to agreements with the United Arab Emirates, Australia and the European Free Trade Association. India has also negotiated a free trade agreement with the European Union and is in trade talks with several other partners, including Canada, Chile and Israel. As cross-border trade and investment expand, it is increasingly important for businesses to clarify international tax disputes and mechanisms to avoid double taxation.

How disputes will be resolved

Regarding the safe harbor, the guidance prevents a taxpayer who has elected to the provision from claiming MAP relief for covered transactions. However, if the decision of the foreign tax authority disturbs the safe harbor return filed in India, the foreign affiliate can apply for MAP through its own competent authority which informs India accordingly. India will allow MAP but keep the price in the safe harbor and only ask the other country for relief, it noted.

The CBDT clarified that the Indian authorities will not deviate from ITAT orders in matters decided on merits. If the tribunal decides in favor of the taxpayer, the MAP case will be closed. If they remand the case for a new determination, taxpayers can apply for a MAP after the new order is made.

According to the document, if a resident has already settled under Vivad se Vishwas (VsV) 2020 or 2024, India will not revisit this settlement in MAP. It can only ask the other country to provide assistance, usually when the overseas affiliate seeks a MAP. If a non-resident settled the same issue under the VsV scheme, MAP will not be available for that issue.

Indian authorities will not provide access to MAP to taxpayers who have already availed the benefits of the scheme in the same matter. However, overseas affiliates can apply for a MAP, with the Indian authorities agreeing to the outcome of the settlement and seeking appropriate relief from the counterparty. If an Indian taxpayer has applied under the program but has not yet paid the relevant taxes, he will be granted MAP access. If the taxpayer subsequently uses the benefits of the system, the result of the settlement will take precedence.

With respect to advance rulings, the guidance allows taxpayers who have received a ruling from the Board of Advance Rulings (BAR) to access the MAP. However, the Indian authorities will not depart from the BAR’s decision in matters decided on the merits and may instead seek appropriate relief from the contracting party.

The guidance also covers withholding tax disputes. Non-residents can request access to MAP against withholding orders under Section 398 of the Income Tax Act 2025. However, discussions between the relevant authorities of the two countries can only begin after an assessment order has been issued in the non-resident’s own case and the taxpayer believes it is in breach of a valid treaty.

The CBDT has also asked taxpayers to keep relevant authorities informed of material developments, including changes in documents previously submitted and the status of parallel proceedings in India or overseas. Sharing relevant information with both authorities will help to “ensure information symmetry” and avoid differences in their understanding of the facts.

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The updated guidance includes changes under the Income Tax Act, 2025 and the Income Tax Rules, 2026, which supersede earlier guidance issued in August 2020 and updated in June 2022. Under most Indian tax treaties, taxpayers have three years from the first notification of a non-treaty tax action to file a MAP application. Indian residents have to use Form 55 under Rule 121 for tax years 2026-27 onwards, while Rule 44G of the repealed Income Tax Rules, 1962 will continue to apply for earlier assessment years.

India will aim to resolve MAP cases within 24 months on average, although the CBDT has clarified that this is not a guarantee. After notification of the ruling, taxpayers have one month from the end of that month to communicate consent and submit proof of withdrawal of pending domestic appeals. The Assessing Officers will have an adequate period of one month for the resolution to take effect.

The guidelines also clarify that if its provisions conflict with national laws, rules, circulars or applicable tax agreement, the relevant legal and contractual provisions will prevail.

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Tax experts said the consolidated CBDT MAP guidelines for 2026 will provide greater certainty to MNCs by clarifying the interaction between international tax dispute resolution and domestic tax administration.

Nitin Narang, transfer pricing partner at Nangia & Co LLP, said the guidelines will align the resolution of contract disputes with the Income Tax Act 2025 and the Income Tax Rules 2026, while clarifying the treatment of parallel litigation and safe harbor provisions.

“The guidelines strike a balance between facilitation for taxpayers and procedural discipline. While providing greater clarity on the interaction between domestic tax appeals, safe harbor rules and treaty-based dispute resolution, they also place greater responsibility on taxpayers to inform relevant authorities of developments in parallel proceedings. This should make India’s MAP framework more predictable and accessible to MNEs,” Narang said.