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Three-Year Block Assessment for Transfer Pricing
India's 2025 Finance Bill introduces an optional three-year block assessment scheme. If the Transfer Pricing Officer establishes an Arm's Length Price (ALP) for one year, the same method may apply for the next two years, aiming to reduce administrative burden and disputes.
Broader Safe Harbour: Digital & Auto Sector
The latest safe harbour notification explicitly covers lithium-ion batteries and broadens sectoral coverage for AYs 2025-26 and 2026-27, enhancing certainty for EV, IT, and pharma value chains.
Expanded Safe Harbour Rules and Higher Turnover Thresholds
CBDT notifies amendments for Assessment Years 2025-26 and 2026-27, raising the turnover threshold (from ₹2b to ₹3b for certain transactions) and expanding safe harbour coverage to sectors like lithium-ion batteries for e-vehicles, IT/ITeS, KPO, pharma R\&D, and auto components.
New Income Tax Bill 2025: AE Definition and ALP Calculation
The new law clarifies the definition of Associated Enterprises and addresses calculation methods for the arm's length price, with the potential to introduce the use of interquartile range or other prescribed methods instead of the mean.
Tolerance Band Notification
For AY 2024-25, the transfer pricing tolerance band is set at 1% for wholesale trading and 3% for other international transactions. This provides certainty and reduces audit risk.
Power to Revise TP Orders
Clarified under Section 263, the Commissioner may revise Assessment Officer orders if transfer pricing instructions from the TPO are not followed. However, direct revision of TPO orders by the Commissioner is generally not permitted.
Alignment with OECD Transfer Pricing Guidelines 2022
India references and adapts the 2022 OECD Transfer Pricing Guidelines, especially for profit split method, financial transactions, and hard-to-value intangibles.
BEPS Pillar 2 (15% Global Minimum Tax) Preparations
India signals intent to adopt the OECD's Pillar-2 regime, promising a 15% minimum effective tax for large multinational enterprises in step with global standards.
Master File, Local File, CbC Reporting Deadlines
CBDT's compliance calendar for FY2024-25: - TP audit (Form 3CEB): Oct 31, 2025 - Transfer pricing documentation: Oct 2025 - Master File: Nov 30, 2025 - CbC reporting: Mar 31, 2026 (if applicable)
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Key TP Challenges for Global Capability Centres (GCCs)
No direct CBDT notification, but the official documentation framework and safe harbour expansion address concerns around benchmarking, cost allocation, and value chains relevant for Indian GCCs.
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