THE government will soon allow Indian units of foreign companies to file tax returns without the scrutiny of tax authorities, a move that will help such companies avoid procedural hassles.

Currently, such companies have to get their transfer pricing returns cleared by the income tax department before filing them. Transfer pricing refers to the price at which one arm of a multinational corporation transfer goods or services to another division to calculate profit and loss separately.

Safe harbour rules are at an advanced stage of consideration, central board of direct taxes (CBDT) chairman SSN Moorthy said on Monday. I cant share how the guidelines are going to be...it will be a very favourable programme, he said at an Assocham meet in New Delhi.

Safe harbour rules are norms that would enable the income tax authorities to accept without scrutiny the tax returns of Indian units of foreign companies.

The CBDT, the apex government body on direct taxes, has set up a committee to formulate safe harbour provisions.

Speaking on the sidelines of the function, Mr Moorthy said the government will scrutinise all cross-border merger deals, similar to the Vodafone-Hutchison deal, as part of its efforts to track down cases of tax evasion.

We are in the process of investigating other cases. They are in various stages of processing, he said.

Mr Moorthy refused to specify which deals are being investigated by the tax department to check duty evasion.