India Transfer Pricing Regulations – Income Tax Bill, 2025 Key Insights

The India Union Budget 2025 and the Income Tax Bill 2025 collectively introduce comprehensive Transfer Pricing (TP) reforms, focusing on multi-year ALP determination, streamlined compliance, dispute reduction, and regulatory clarity to enhance tax administration efficiency.

Union Budget 2025

Block TP Assessment with Multi-Year ALP: From AY 2026-27, a 3-year multi-year ALP will apply to similar transactions for consistency. No new ALP references; income re computation must be done within 3 months.

Transfer Pricing in Block Assessment for Search & Requisition Cases: International and specified domestic transactions are excluded from block assessments to prevent ALP disputes. Such income is taxed under normal provisions, ensuring TP compliance.

Safe Harbour Rules – Proposed Expansion: The Finance Minister announced plans to expand Safe Harbour Rules to reduce litigation and enhance tax certainty, with further broadening through regulatory amendments for a more transparent tax environment.

Faceless TP Assessments & Appeals – Cut-Off Date Removal: The deadline for faceless TP assessments and appeals has been removed, ensuring flexible implementation.

Income Tax Bill 2025

Key Framework Updates: The TP framework remains largely unchanged, with minor clarifications to provisions.

Timelines and Compliance: Timelines, compliance procedures, and penalties remain unchanged, ensuring consistency.

Rules and Guidelines: The Board may issue additional rules or guidelines to support TP framework implementation.

Transition from ITL to New IT Bill: Section 536 clarifies the transition from the existing ITL to the New IT Bill, referencing the General Clauses Act, 1897, on the effect of repeal.

Future Rules and Amendments: Post-enactment of the New IT Bill, certain rules will need to be prescribed to address compliance and procedural aspects.

Inconsistencies and Corrections: Several mismatches have been identified in the new sections, which may require corrections upon further examination.

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