Data points
- International transactions above which a local file is required[3]
- INR 1 crore
- Group revenue that, with INR 50 crore of transactions, triggers the full master file[4]
- INR 500 crore
- Group revenue that triggers country-by-country reporting[5]
- INR 6,400 crore
- Voting power at which two enterprises are associated[2]
- 26%
- Penalty on the value of each transaction for missing documentation[6]
- 2%
- How long an Indian local file is kept[3]
- 9 years
- To produce documents after a notice, extendable by up to 30[3]
- 10 days
- Safe harbour operating margin for technology services up to INR 2,000 crore[7]
- 15.5%
- When the new income tax law and its transfer pricing forms took effect[1]
- Apr 1, 2026
- Forward cover of an advance pricing agreement, with four years of rollback[1]
- 5 years
India moved its transfer pricing rules into a new income tax law on 1 April 2026. The arithmetic did not change. The paperwork did: Form 3CEB is now Form 48, and the master file is Form 56. A team filing under the old form numbers is filing the wrong forms.
The four facts to know:
- Form 48, the accountant's report, is due for any international transaction or specified domestic transaction, at any value, one month before the return due date.
- A local file is required once international transactions pass INR 1 crore in the tax year. It is kept rather than filed, for nine years.
- Part A of the master file is due from every constituent entity of an international group. The full file starts at INR 500 crore of group revenue with INR 50 crore of international transactions.
- Missing or incorrect documentation costs 2% of the value of each transaction, international and domestic alike.
What are India's latest transfer pricing rules?
India prices goods, services, intellectual property and financing moved between associated enterprises at arm's length, and from 1 April 2026 those rules live in a new income tax law and a new set of rules. The old sections 92 to 92F are gone as a numbering, replaced by a single chapter covering associated enterprises, advance pricing agreements, documentation, the accountant's report and country-by-country reporting. The Income Tax Department administers the regime[1].
India belongs to the OECD Inclusive Framework but is not an OECD member, and Indian law does not explicitly make the OECD Transfer Pricing Guidelines directly applicable. The three-tier documentation structure mirrors the OECD pattern in practice, which is why a group's global documentation usually maps onto India with work rather than a rewrite.
What counts as an associated enterprise in India?
Two enterprises are associated when one holds at least 26% of the voting power in the other, directly or indirectly. Several further tests go wider than ownership and catch arrangements that look commercial from the outside. The Income Tax Department publishes the associated enterprise tests[2] in full.
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| Trigger | Threshold | Source |
|---|---|---|
| Voting power | At least 26%, directly or indirectly | Income Tax Department, India |
| Loan | At least 51% of the borrower's total assets at book value | Income Tax Department, India |
| Guarantee | At least 10% of the other party's total borrowings | Income Tax Department, India |
| Board control | Appointing more than half the board or the executive directors | Income Tax Department, India |
| Know-how dependence | Wholly dependent on the other party's patents, know-how, trademarks or licences | Income Tax Department, India |
| Raw materials | 90% or more supplied by the other party at influenced prices | Income Tax Department, India |
The guarantee test is the one that surprises groups. A parent guaranteeing 10% of a subsidiary's borrowings makes the two associated even with no shareholding at all, and the guarantee itself then has to be priced.
Do India's transfer pricing rules apply to domestic transactions?
Yes. Specified domestic transactions sit inside the regime, and Form 48 covers every person with one, exactly as it covers international transactions. The historic trigger was an aggregate value above INR 20 crore, raised from INR 5 crore with effect from assessment year 2016-17.
The definition and the aggregate threshold under the new law are not confirmed from a primary source, so the INR 20 crore figure here is the historic position rather than a 2026 one. What is confirmed is the penalty: 2% of transaction value applies to domestic transactions on the same terms as international ones.
What transfer pricing methods does India allow?
Six, not five. India adds an "other method" to the five OECD methods, which allows any price that would be charged between independent parties where no standard method fits. There is no hierarchy. The taxpayer picks the most appropriate method on the transaction's nature, functions, data availability and comparability, and the tax officer can substitute a different one at assessment.
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| Method | Best suited for | Source |
|---|---|---|
| Comparable uncontrolled price | Commodities, royalties, interest | Income Tax Department, India |
| Resale price | Distributors adding little value | Income Tax Department, India |
| Cost plus | Manufacturers and service providers | Income Tax Department, India |
| Transactional net margin | Captive technology, outsourced services and business process entities | Income Tax Department, India |
| Profit split | Integrated operations and unique intangibles | Income Tax Department, India |
| Other method | Anything no standard method fits | Income Tax Department, India |
The transactional net margin method dominates Indian practice, particularly for captive technology, outsourced services and business process entities, which is what most foreign-parented groups run in India.
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How does benchmarking work in India?
India narrows the arm's length range rather than using the full interquartile one. The range runs from the 35th to the 65th percentile where the dataset has six or more comparables, and the permissible variation is 3%, or 1% for wholesale trading. Those figures come from the rules in force before 2026, and whether they carry forward unchanged is not confirmed from a primary source.
A study runs in five steps: the functional analysis of functions, assets and risks on each side, the economic analysis that picks the method and the profit level indicator, the comparability filters, the comparability adjustments, and the range itself. Fresh documentation for a continuing transaction is needed only where its nature, terms, assumptions or other pricing factors change significantly. India states no preferred comparables database.
What transfer pricing documentation does India require?
Three tiers, each with its own threshold and its own deadline: a local file, a master file in two parts, and a country-by-country report. The accountant's report sits alongside all three and is required whatever your size.
What is the local file threshold in India?
INR 1 crore of aggregate international transactions in the tax year. Below that, no local file. Above it, the file covers the functional analysis, the economic analysis and the justification for the method chosen. It is kept rather than filed, for nine years from the end of the tax year, and produced within 10 days of a notice, extendable by up to 30 days. The Income Tax Department publishes the local file rule[3].
Who must file a master file in India?
Part A of Form 56 is due from every constituent entity of an international group, regardless of size. The full Form 56 is due where consolidated group revenue passes INR 500 crore and international transactions pass INR 50 crore, or intangible property transactions pass INR 10 crore. Form 57 designates one Indian filer, 30 days before the Form 56 deadline. The Income Tax Department publishes the master file rule[4].
What is the country-by-country threshold in India?
INR 6,400 crore of consolidated group revenue. Form 59 is the report, filed within 12 months of the reporting year end. Form 58 is the notification, due two months before the report, and Form 60 designates the Indian filer. The Income Tax Department publishes the country-by-country rule[5].
What is Form 48 and who must file it?
Form 48 is the accountant's report, and it replaces Form 3CEB. Every person with an international transaction or a specified domestic transaction in the tax year files it, whatever the value, certified by a Chartered Accountant, one month before the return due date. There is no de minimis.
Form 48 and Form 56 are different things and are routinely confused. Form 48 is the accountant's certificate on your transactions. Form 56 is the master file. A group can owe Form 48 and owe no master file at all. Whether the new rules carve out any exemption from Form 48 by income level, transaction floor or safe harbour election is not confirmed from a primary source.
When are India's transfer pricing deadlines?
Everything keys off the return due date, so the calendar moves with it rather than sitting on fixed dates. The two to plan around are the accountant's report, one month ahead of the return, and the filer designations, which fall before the filings they relate to.
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| Obligation | Deadline | Source |
|---|---|---|
| Form 48 accountant's report | One month before the return due date | Income Tax Department, India |
| Local documentation, on request | Within 10 days of a notice, extendable by up to 30 days | Income Tax Department, India |
| Master file, Form 56 | The return due date | Income Tax Department, India |
| Filer designation, Form 57 | 30 days before the Form 56 deadline | Income Tax Department, India |
| Country-by-country notification, Form 58 | Two months before the report deadline | Income Tax Department, India |
| Country-by-country report, Form 59 | 12 months from the end of the reporting year | Income Tax Department, India |
| Country-by-country filer designation, Form 60 | No date prescribed | Income Tax Department, India |
What are the penalties for getting India transfer pricing wrong?
Penalties attach per failure and per transaction, which is what makes them large. Not keeping documents, not reporting a transaction or furnishing incorrect information costs 2% of the value of each transaction. A group with twenty intercompany transactions is exposed twenty times over.
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| Failure | Penalty | Source |
|---|---|---|
| Not keeping documents, not reporting, or incorrect information | 2% of the value of each transaction, international and domestic | Income Tax Department, India |
| Not furnishing master file information | INR 5,00,000 | Income Tax Department, India |
| Not furnishing documents on request | 2% of transaction value, per failure | Income Tax Department, India |
| Country-by-country failures | INR 5,000 a day up to one month, INR 15,000 a day after that, INR 50,000 a day once a penalty order is served, and INR 5,00,000 for inaccurate information | Income Tax Department, India |
| Late Form 48 report | INR 50,000 up to one month late, INR 1,00,000 beyond | Income Tax Department, India |
The old separate penalty for not furnishing the accountant's report was removed on 1 April 2026, so the late filing fine above is now the whole of that exposure. The Income Tax Department publishes the documentation penalty[6]. The under-reporting penalty tied to a transfer pricing adjustment is not confirmed under the new law, so this page does not repeat the widely quoted 50% and 200% figures.
How does a transfer pricing audit work in India?
The assessing officer can refer international transactions and specified domestic transactions to a specialist transfer pricing officer, and that reference adds a year to the assessment clock. The assessment order is due within 12 months from the end of the financial year following the tax year, with a further 12 months where the case goes to the transfer pricing officer.
Documents requested during a proceeding are due within 10 days, extendable by up to 30. Whether the transfer pricing officer's determination binds the assessing officer under the new law, as it did under the old one, is not confirmed from a primary source. The appeal route runs to the Income Tax Appellate Tribunal, then the High Court, then the Supreme Court.
Does India offer safe harbours?
Yes, elective, for a block of three tax years starting 2026-27. Accepting the prescribed margin takes an eligible taxpayer out of scrutiny on that transaction, which is worth more than the margin itself for a captive services entity. The Income Tax Department publishes the safe harbour margins[7].
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| Category | Safe harbour margin for 2026-27 | Source |
|---|---|---|
| Technology and technology-enabled services, revenue up to INR 2,000 crore | At least 15.5% operating margin on operating expenses | Income Tax Department, India |
| Contract research and generic pharmaceuticals, up to INR 300 crore | At least 24% | Income Tax Department, India |
| Auto components | 12% for core, 8.5% for non-core | Income Tax Department, India |
| Data centre services | At least 15% | Income Tax Department, India |
| Corporate guarantees | At least 1% a year on the amount guaranteed | Income Tax Department, India |
| Low value-adding intra-group services | Up to 5% markup, aggregate up to INR 10 crore | Income Tax Department, India |
| Intra-group rupee loans | The State Bank of India one year marginal cost of funds lending rate plus 175 to 625 basis points, by credit rating | Income Tax Department, India |
| Foreign currency loans | A reference rate, such as six month secured overnight financing rate plus 45 basis points, plus 150 to 600 basis points | Income Tax Department, India |
Can you get an advance pricing agreement in India?
Yes. Unilateral, bilateral and multilateral agreements are all available, covering up to five future tax years, with rollback of up to four prior years, for a flat filing fee of INR 20 lakh. Form 51 is the application, Form 52 the annual compliance report and Form 54 the renewal. Whether rollback is automatic or discretionary is not confirmed beyond the four year cap.
India's agreement programme is one of the busiest outside the United States, and for a captive services entity with a stable margin it is usually the cheapest certainty available.
How are transfer pricing disputes and double taxation resolved in India?
An adjustment in one country taxes the same profit twice unless relief comes through the mutual agreement procedure under a treaty, a bilateral advance pricing agreement, or a domestic appeal. Availability of the mutual agreement procedure depends on the specific treaty, and timelines are not confirmed, so check the treaty that applies to your corridor rather than assuming a standard.
A bilateral agreement prevents the dispute instead of resolving it, and its rollback reaches four prior years. Litigation is the last resort, through the Income Tax Appellate Tribunal, the High Court and the Supreme Court, and it is slow.
How we help with India transfer pricing
India asks for a certificate on every transaction, a file above a crore, a master file in two parts and a country-by-country report, all keyed to a return date that moves. We benchmark each transaction, write the local file, prepare Form 48 and Form 56, and file them against the right deadline. See how our transfer pricing software works.
Book a demo to get a read on your Form 48 and master file exposure before the next return.
Official sources
7 sources
- 1.Income Tax Department, India. Income Tax Department (Central Board of Direct Taxes)
- 2.Income Tax Department, India. Associated enterprise tests
- 3.Income Tax Department, India. Transfer pricing documentation rule (local file)
- 4.Income Tax Department, India. Master file rule (Form 56 and Form 57)
- 5.Income Tax Department, India. Country-by-country reporting rule (Forms 58, 59 and 60)
- 6.Income Tax Department, India. Penalty for failure to keep and furnish transfer pricing documents
- 7.Income Tax Department, India. Safe harbour margins
Article by
Shrey
GM of Transfer Pricing, Commenda
Shrey is GM of Transfer Pricing at Commenda, where he leads the transfer pricing business. He works with finance and tax teams at multinational companies on intercompany pricing, documentation and benchmarking across the countries they operate in.
Disclaimer: Commenda and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
