Intra-group loans are one of the most common international transactions requiring transfer pricing compliance. The safe harbour regime under the Income Tax Act, 2025 provides clear, pre-determined interest rate matrices for intra-group loans denominated in Indian rupees and foreign currencies. Understanding these matrices is essential for multinational enterprises with cross-border financing arrangements.
The Regulatory Framework
Rule 89 of the Income Tax Rules, 2026 prescribes the safe harbour interest rates for intra-group loans. The rates are based on:
- The currency of denomination (INR or foreign currency)
- The credit rating of the associated enterprise
- The aggregate amount of loans advanced
INR-Denominated Intra-Group Loans
Interest Rate Formula
Interest Rate = 1-year MCLR of State Bank of India as on 1st April of the relevant tax year + Spread
Spread Based on Credit Rating
| Credit Rating | Spread |
|---|---|
| AAA to A or equivalent | 175 basis points |
| BBB--, BBB, BBB+ or equivalent | 325 basis points |
| BB to B or equivalent | 475 basis points |
| C to D or equivalent | 625 basis points |
| Not available (aggregate loans ≤ ₹100 crore) | 425 basis points |
Example Calculation
If the 1-year MCLR on 1st April is 8.5%:
- AAA rated enterprise: 8.5% + 1.75% = 10.25%
- BBB rated enterprise: 8.5% + 3.25% = 11.75%
- BB rated enterprise: 8.5% + 4.75% = 13.25%
- Not rated (≤ ₹100 crore): 8.5% + 4.25% = 12.75%
Foreign Currency-Denominated Intra-Group Loans
Interest Rate Formula
Interest Rate = Reference Rate of the relevant foreign currency as on 30th September of the relevant tax year + Spread
Reference Rates
| Currency | Reference Rate |
|---|---|
| US Dollar | 6-month Term SOFR + 45 basis points |
| Euro | 6-month EURIBOR |
| UK Pound Sterling | 6-month Term SONIA + 30 basis points |
| Japanese Yen | 6-month Tokyo Term Risk Free Rate + 10 basis points |
| Australian Dollar | 6-month Bank Bill Swap Rates |
| Singapore Dollar | 6-month Compounded SORA + 45 basis points |
Spread Based on Credit Rating and Loan Amount
Where aggregate loans do not exceed ₹250 crore equivalent:
| Credit Rating | Spread |
|---|---|
| AAA, AA+, AA, AA-, A+, A, A- or equivalent | 150 basis points |
| BBB+, BBB, BBB- or equivalent | 300 basis points |
| BB+, BB, BB-, B+, B, B-, C+, C, C-, D or equivalent or not available | 400 basis points |
Where aggregate loans exceed ₹250 crore equivalent:
| Credit Rating | Spread |
|---|---|
| AAA, AA+, AA, AA-, A+, A, A- or equivalent | 150 basis points |
| BBB+, BBB, BBB- or equivalent | 300 basis points |
| BB+, BB, BB-, B+, B, B- or equivalent | 450 basis points |
| C+, C, C-, D or equivalent or not available | 600 basis points |
Credit Rating Requirements
Applicable Rating
The credit rating assigned to the associated enterprise by a SEBI-registered and RBI-accredited credit rating agency, which is applicable for the relevant tax year.
Multiple Ratings
Where the associated enterprise has a credit rating from more than one credit rating agency, the least of such ratings shall be taken as its credit rating.
Aggregate Loan Amount
INR Loans
The aggregate amount of loan advanced to the associated enterprise including loans to all associated enterprises in Indian Rupees as on the 31st March of the relevant tax year.
Foreign Currency Loans
The aggregate amount of loan advanced to the associated enterprise including loans to all associated enterprises, converted to Indian rupees, as on the 31st March of the relevant tax year.
Certification Requirements
The safe harbour for intra-group loans requires certification by an accountant or Cost and Management Accountant confirming:
- The interest rate declared is not less than the prescribed rate
- The credit rating used is valid
- The aggregate loan amount is correctly computed
Expert Legal Guidance
Understanding the intra-group loan safe harbour interest rate matrices is essential for multinational enterprises with cross-border financing. Anuj Desai & Associates provides expert advisory services on transfer pricing compliance, helping taxpayers determine applicable rates, obtain appropriate credit ratings, and ensure compliance with safe harbour conditions.