India's transfer pricing landscape has undergone a remarkable transformation. In FY 2024–25, the Central Board of Direct Taxes (CBDT) signed a record 174 Advance Pricing Agreements, the highest in any single financial year since the programme's launch in 2012. Cumulative APAs now stand at 815, comprising 615 unilateral and 200 bilateral or multilateral agreements, touching counterparts in Australia, Japan, Singapore, South Korea, the Netherlands, the UK, and the US.
The 174 APAs signed in FY 2024–25 alone brought tax certainty covering 970 years of transfer pricing positions across Indian multinationals, a remarkable statistic that underscores how the programme is reshaping India's relationship with cross-border tax.
The New Multi-Year Arm's Length Pricing Mechanism
The Finance Act, 2025 introduced a landmark amendment to Section 92CA of the Income-tax Act, 1961: a "repeat-transaction" mechanism. Under this framework, taxpayers may opt to apply the arm's length price (ALP) determined for a particular assessment year to "similar" international or specified domestic transactions for the two immediately succeeding years. This dramatically reduces the compliance burden for routine, low-risk cross-border transactions.
Safe Harbour Expansion: Key Changes
Notification No. 21/2025 (March 25, 2025) introduced significant amendments to India's Safe Harbour Rules. Highlights include the elevation of the value limit for specified international transactions from INR 2 billion to INR 3 billion, enabling more taxpayers to benefit. Additionally, Safe Harbour applicability is now confirmed for two consecutive assessment years AY 2025–26 and AY 2026–27 restoring earlier practice and providing greater planning certainty.
IT/ITES services: Minimum margin of 18% for software development and IT-enabled services
R&D services: Margin of 24% for software or pharmaceutical R&D
Intra-group loans: Interest within LIBOR-plus prescribed margins
Corporate guarantees: Minimum commission rate of 1%
Strategic Implications for MNEs
India's Global Capability Centres (GCCs) have emerged as a key interface for TP compliance, with 76% of GCCs now handling cross-border tax operations including benchmarking and documentation. For multinationals, the clear policy signal from CBDT is that proactive APA filing rather than reactive audit defence is the preferred route. APAs resolved over 80% of covered disputes within two years, making them far more cost-effective than litigation in a system where just 300 Transfer Pricing Officers manage over 40,000 MNE cases.
