FY 2025-26 Transfer Pricing Under the 1961 Act: Forms 3CEB, 3CEAA and 3CEAD After the 2025 Act
The Income-tax Act, 2025 came into force on 1 April 2026, but transfer pricing compliance for international and specified domestic transactions entered into in FY 2025-26 still runs under Chapter X (Sections 92 to 92F) of the Income-tax Act, 1961 and the Income-tax Rules, 1962. This article sets out why, the FY 2025-26 due dates for Forms 3CEB, 3CEAA and 3CEAD, the thresholds, how the arm’s length range works, and the penalties that apply.
Key Takeaways
- FY 2025-26 (AY 2026-27) is governed by the 1961 Act. Section 536(2)(b) of the Income-tax Act, 2025 preserves obligations incurred under the repealed Act, and Section 536(2)(c) keeps proceedings for tax years beginning before 1 April 2026 under the repealed Act.
- Where Section 92E applies, the return due date for AY 2026-27 is 30 November 2026, so Form 3CEB is due one month earlier, on 31 October 2026. The tax audit report in these cases is also due on 31 October 2026.
- Form 3CEAA (master file) is due on or before the return due date. The Rs 500 crore group revenue test is applied to the accounting year itself, not the year before.
- Form 3CEAD (country-by-country report) is due within 12 months from the end of the reporting accounting year. For a year ending 31 March 2026, that is 31 March 2027.
- The corresponding provisions of the Income-tax Act, 2025 (Sections 161 to 173, and Section 511 for the country-by-country report) apply from Tax Year 2026-27.
Why the 1961 Act Still Governs FY 2025-26 Transfer Pricing
Section 536(1) of the Income-tax Act, 2025 repeals the 1961 Act. Section 536(2) then saves the old law for earlier years. The clauses that matter for transfer pricing are:
- Section 536(2)(a) and (b): the repeal does not affect the previous operation of the 1961 Act, or any right, privilege, obligation or liability acquired, accrued or incurred under it. The Section 92E duty to furnish an accountant’s report for previous year 2025-26 is one such obligation.
- Section 536(2)(c): the 1961 Act continues to apply to proceedings pending on 1 April 2026 and to proceedings initiated on or after that date (including assessment, reassessment, penalty, reference, revision and appeals) for any tax year beginning before 1 April 2026. A reference to the Transfer Pricing Officer under Section 92CA for AY 2026-27 or an earlier year therefore runs under the 1961 Act.
- Section 536(2)(d): penalty proceedings for a tax year beginning before 1 April 2026 may be initiated and penalties imposed under the 1961 Act.
- Section 536(2)(e): proceedings pending on commencement before any income-tax authority, the Appellate Tribunal or a court continue and are disposed of as if the 2025 Act had not been enacted.
- Section 536(2)(j): any agreement entered into, notification, order or rule issued under the 1961 Act continues in force, so far as it is not inconsistent with the corresponding provisions of the 2025 Act.
The CBDT’s FAQs on the transition (updated 2 April 2026) apply these clauses in the same way. FAQ Q3.5 says the return for income earned in FY 2025-26 is filed for AY 2026-27 under the 1961 Act, and FAQ Q3.25 says the audit report for FY 2025-26 is filed in the prescribed form under the old Act even though filing happens after 1 April 2026. FAQ Q7.19 confirms that a draft order under Section 144C of the 1961 Act corresponds to Section 275(1) of the 2025 Act.
FY 2025-26 Transfer Pricing Due Dates
Section 92E requires every person who entered into an international transaction or specified domestic transaction during the previous year to furnish an accountant’s report by the “specified date”. Section 92F(iv) defines the specified date as one month before the due date for the return under Section 139(1). Under Explanation 2 to Section 139(1), that due date is 30 November where Section 92E applies. Rule 10E prescribes Form 3CEB for the report.
| Filing | Provision | Due date for FY 2025-26 (AY 2026-27) |
|---|---|---|
| Form 3CEB (accountant’s report) | Section 92E, Section 92F(iv), Rule 10E | 31 October 2026 |
| Tax audit report (Form 3CA or 3CB with 3CD), transfer pricing cases | Section 44AB; CBDT FAQ Q3.25 | 31 October 2026 |
| Return of income, where Section 92E applies | Section 139(1), Explanation 2 | 30 November 2026 |
| Form 3CEAA (master file) | Section 92D(4), Rule 10DA(2) | On or before the Section 139(1) due date (30 November 2026 where Section 92E applies) |
| Form 3CEAB (designated entity intimation, where more than one constituent entity must file Form 3CEAA) | Rule 10DA(4) | 30 days before the Form 3CEAA due date (31 October 2026 if Form 3CEAA is due on 30 November 2026) |
| Form 3CEAC (notification by an Indian constituent entity of a foreign-parented group) | Section 286(1), Rule 10DB(2) | Two months before the due date of the Section 286(2) report |
| Form 3CEAD (country-by-country report) | Section 286(2) and (4), Rule 10DB(3) and (4) | 12 months from the end of the reporting accounting year (31 March 2027 for a year ending 31 March 2026) |
A common error is to plan the tax audit report for 30 September 2026 in an entity that also files Form 3CEB. FAQ Q3.25 states the audit report is due one month before the return due date, which is 31 October 2026 for transfer pricing cases where the return is due on 30 November 2026.
Master File and Country-by-Country Report Thresholds
Form 3CEAA (master file)
Under Rule 10DA(1), a constituent entity of an international group must keep and maintain the master file information where both conditions are met:
- the consolidated group revenue, as reflected in the consolidated financial statement for the accounting year, exceeds Rs 500 crore; and
- the aggregate value of international transactions during the accounting year, as per the books of account, exceeds Rs 50 crore, or the aggregate value of international transactions in respect of purchase, sale, transfer, lease or use of intangible property exceeds Rs 10 crore.
The revenue test looks at the accounting year for which the master file is being prepared. A common error is to test the Rs 500 crore limit against the preceding year’s revenue, which is the test used for the country-by-country report, not the master file. Two further points from Rule 10DA: Part A of Form 3CEAA must be furnished even where the thresholds are not met (Rule 10DA(3)), and the information must be kept for eight years from the end of the relevant assessment year (Rule 10DA(6)).
Form 3CEAD (country-by-country report)
Section 286(7) switches off the country-by-country reporting provisions for an accounting year if the total consolidated group revenue for the preceding accounting year does not exceed the prescribed amount. Rule 10DB(6) prescribes Rs 6,400 crore. A parent entity or alternate reporting entity resident in India furnishes the report in Form 3CEAD within 12 months from the end of the reporting accounting year (Section 286(2), Rule 10DB(3)). An Indian constituent entity that must file under Section 286(4) has the same 12-month period under Rule 10DB(4), or six months from the end of the month in which a systemic failure of the parent’s country is intimated to it.
Computing the Arm’s Length Price for FY 2025-26
Section 92C(1) requires the most appropriate of six methods: comparable uncontrolled price, resale price, cost plus, profit split, transactional net margin, or such other method as the Board prescribes. Where the method produces more than one price, Rule 10CA applies:
- If the dataset has six or more entries and the method is not profit split or the other method, an arm’s length range runs from the 35th to the 65th percentile (Rule 10CA(4)).
- A transaction price within the range is deemed to be the arm’s length price (Rule 10CA(5)). A price outside the range is replaced by the median of the dataset (Rule 10CA(6)).
- Where the range does not apply, the arm’s length price is the arithmetical mean, and the actual price is accepted if the variation does not exceed the percentage notified by the Central Government, which cannot exceed 3% (proviso to Rule 10CA(7)). The first and second provisos to Section 92C(2) do not apply to transactions undertaken on or after 1 April 2014 (third proviso to Section 92C(2)).
Illustration (hypothetical figures): An Indian captive service provider charges its foreign parent cost plus 10%. Its operating cost for FY 2025-26 is Rs 50 crore, so the service fee is Rs 55 crore. Transactional net margin method is applied with operating profit to operating cost as the indicator, and seven comparables give margins of 7.0%, 9.5%, 11.0%, 12.5%, 14.0%, 15.5% and 18.0%.
- 35th percentile: 7 x 0.35 = 2.45, so the 3rd value, 11.0%.
- 65th percentile: 7 x 0.65 = 4.55, so the 5th value, 14.0%.
- Median: 7 x 0.50 = 3.5, so the 4th value, 12.5%.
The 10% mark-up is below the 11.0% to 14.0% range, so the arm’s length price is taken at the median: Rs 50 crore x 1.125 = Rs 56.25 crore. The adjustment is Rs 56.25 crore minus Rs 55 crore = Rs 1.25 crore. Had the mark-up been 11.5%, it would sit within the range and no adjustment would arise. Because Rs 1.25 crore exceeds Rs 1 crore, a secondary adjustment under Section 92CE must also be considered if the primary adjustment falls in one of the cases listed in Section 92CE(1), for example where it is made suo motu in the return or accepted by the assessee.
Advance Pricing Agreements Across the Cutover
Under Section 92CC(4), an advance pricing agreement is valid for up to five consecutive previous years, and Section 92CC(9A) allows it to cover up to four previous years before the first of those years. Where an agreement is entered into after a return has been filed for a covered year, Section 92CD(1) requires a modified return within three months from the end of the month in which the agreement was entered into.
For agreements that run past 31 March 2026, Section 536(2)(j) keeps an agreement entered into under the 1961 Act in force so far as it is not inconsistent with the corresponding provisions of the 2025 Act. CBDT FAQ Q10.12 confirms that an agreement signed under the old Act continues to bind the assessee and the department under the new Act on that basis. Section 168 of the 2025 Act corresponds to Section 92CC.
Penalties for FY 2025-26 Defaults
| Default | Section (1961 Act) | Penalty |
|---|---|---|
| Failure to keep and maintain documentation under Section 92D(1) or (2), failure to report a transaction, or incorrect information or documents | 271AA(1) | 2% of the value of each international transaction or specified domestic transaction |
| Failure to furnish master file information under Section 92D(4) | 271AA(2) | Rs 5,00,000 |
| Failure to furnish the Section 92E report (Form 3CEB) | 271BA | Rs 1,00,000 |
| Failure to furnish information or documents called for under Section 92D(3) | 271G | 2% of the value of the transaction for each failure |
| Failure to furnish the Section 286(2) report | 271GB(1) | Rs 5,000 per day for the first month; Rs 15,000 per day beyond one month |
| Failure to produce information under Section 286(6) | 271GB(2) | Rs 5,000 per day |
| Failure continuing after a penalty order is served | 271GB(3) | Rs 50,000 per day |
| Inaccurate information in the country-by-country report, in the cases listed in the section | 271GB(4) | Rs 5,00,000 |
Section 273B provides that no penalty under Sections 271AA, 271BA, 271G or 271GB is imposable if the person proves there was reasonable cause for the failure. Section 536(2)(d) of the 2025 Act allows these penalties to be initiated and imposed under the 1961 Act for FY 2025-26 and earlier years.
Where the Provisions Sit in the Income-tax Act, 2025
For transactions in Tax Year 2026-27 onwards, Chapter X of the 2025 Act applies. The corresponding sections are:
| Subject | 1961 Act | Income-tax Act, 2025 |
|---|---|---|
| Computation having regard to arm’s length price | 92 | 161 |
| Associated enterprise | 92A | 162 |
| International transaction | 92B | 163 |
| Specified domestic transaction | 92BA | 164 |
| Determination of arm’s length price | 92C | 165 |
| Reference to Transfer Pricing Officer | 92CA | 166 |
| Safe harbour rules | 92CB | 167 |
| Advance pricing agreement | 92CC | 168 |
| Effect to advance pricing agreement | 92CD | 169 |
| Secondary adjustment | 92CE | 170 |
| Documentation and master file | 92D | 171 |
| Accountant’s report | 92E | 172 |
| Definitions | 92F | 173 |
| Country-by-country report | 286 | 511 |
Related Posts
- Section 14A and Rule 8D in the FY 2025-26 tax audit
- ITR forms for AY 2026-27: FY 2025-26 returns under the 1961 Act
- Reassessment under Sections 147 and 148 after 1 April 2026
Need a Review of Your Transfer Pricing Position?
If you have international or specified domestic transactions in FY 2025-26, and want your Form 3CEB, master file or benchmarking reviewed, talk to an expert from the Tax Update India team.
Sources: Income-tax Act, 2025 (Sections 161 to 173, 511 and 536); Income-tax Act, 1961 as amended by the Finance Act, 2026 (Sections 92 to 92F, 139(1), 271AA, 271BA, 271G, 271GB, 273B and 286); Income-tax Rules, 1962 (Rules 10CA, 10DA, 10DB and 10E); CBDT, FAQs on Interplay and Transition from the Income Tax Act, 1961 to the Income Tax Act, 2025 (updated 2 April 2026).
Disclaimer: This article is for general information only and does not constitute legal or tax advice. Tax positions depend on the facts of each case. Section numbers refer to the Income-tax Act, 1961 unless otherwise stated. Consult a qualified professional before acting on any information here.
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