CBDT FAQ Deep-Dive Series #5: Transfer Pricing Transition Under Sections 92 to 92F of the Income-tax Act 1961 Preserved by Section 536 Sub-Clause 5 of the Income-tax Act 2025 for FY 2025-26 Files – Form 3CEB October 31 2026 Deadline, Form 3CEAA Master File Rule 10DA, Form 3CEAD CbCR Rule 10DB, Section 92CA TPO Reference, Section 92CB Safe Harbour Rule 10TD, and the 8-Step Practitioner Sprint Before October 31, 2026

Key Takeaways

• Section 536 sub-clause 5 of the Income-tax Act 2025 preserves the entire Chapter X transfer pricing framework (Sections 92 to 92F of the 1961 Act, read with Rules 10A to 10THD of the Income-tax Rules 1962) for international and specified-domestic transactions undertaken on or before March 31, 2026. AY 2026-27 Form 3CEB, Form 3CEAA master file, Form 3CEAD CbCR, Form 3CEFA safe harbour, and any Section 92CC APA filed for FY 2025-26 are filed under the 1961 Act numbering.
• Form 3CEB for AY 2026-27 is due October 31, 2026 under Section 92E read with Rule 10E. Form 3CEAA (master file) and Form 3CEAB (constituent-entity notification) are due November 30, 2026. Form 3CEAD CbCR is due 12 months from the reporting accounting year-end (i.e., March 31, 2027 for FY 2025-26 ending March 31, 2026).
• The Section 92CA TPO reference, Section 92CB safe harbour election under Rule 10TD, the Section 92CC APA programme, and the Section 90/90A MAP route all continue exactly as drafted under the 1961 Act. Successor section numbers in the Income-tax Act 2025 (Sections 165 to 175, where applicable) apply only for transactions undertaken on or after April 1, 2026, i.e., AY 2027-28 and later.
• Penalty exposure under Sections 271BA (Form 3CEB), 271AA (documentation), 271G (information / document furnishing), 271GB (master file / CbCR), and 270A (under-reporting) remains governed by the 1961 Act provisions for FY 2025-26 default. Section 273B reasonable-cause defence remains available.
• The September 30, 2026 tax audit deadline (Form 3CD) precedes the October 31, 2026 transfer pricing deadline (Form 3CEB). Practitioners with portfolios spanning both must sequence the TP work to ensure Form 3CEB benchmarking, ALP analysis, and DEMPE / control analysis are signed off before the October 31 filing window opens.

Why this matters: the Income-tax Act 2025 Q2 transition arc continues

The Income-tax Act 2025 was assented to on April 1, 2026, replacing the Income-tax Act 1961 prospectively. CBDT’s 99-page transition FAQ (released in two tranches across April and early May 2026) confirmed the operating principle: every section of the 1961 Act stands for any previous year that ends on or before March 31, 2026. The 2025 Act applies from FY 2026-27 onwards (AY 2027-28). The bridge between the two regimes sits inside Section 536 of the 2025 Act, a saving clause structured as nine sub-clauses each preserving a specific area of 1961 Act machinery during the cutover.

This is the fifth deep-dive in our CBDT FAQ Deep-Dive Series. Earlier instalments covered TDS transition (Post 732, May 12), Section 147-148 reassessment continuity (Post 737, May 15), loss carry-forward continuity (Post 741, May 19), and capital gains transition under sub-clause 5 (Post 746, May 22). This chapter opens the transfer pricing transition: the international transaction framework under Chapter X of the 1961 Act, comprising Sections 92, 92A, 92B, 92BA, 92C, 92CA, 92CB, 92CC, 92CD, 92D, 92E, and 92F, together with Rules 10A to 10THD of the Income-tax Rules 1962, all of which are read with Section 536 sub-clauses 1 and 5 to continue governing FY 2025-26 transactions.

What Section 536 sub-clause 5 actually says for transfer pricing

Section 536 sub-clause 5 reads: “Notwithstanding the repeal of the Income-tax Act 1961, the provisions of Chapter X of the said Act shall continue to apply to any international transaction or specified domestic transaction undertaken on or before the 31st day of March, 2026 and to any proceeding arising therefrom, as if this Act had not been enacted.”

The operative phrase is “any international transaction or specified domestic transaction undertaken on or before March 31, 2026”. The transition test is the transaction date, not the assessment year, not the return filing date, not the assessment order date. A transaction recorded on March 31, 2026 falls inside the 1961 Act framework; a transaction recorded on April 1, 2026 falls inside the 2025 Act framework. This is structurally identical to sub-clause 4 (preserves the assessment, audit, and machinery provisions of the 1961 Act for FY 2025-26 and earlier income) and sub-clause 5 (capital gains transfers on or before March 31, 2026).

For the typical Indian MNE filing Form 3CEB for AY 2026-27 in October 2026, every transaction reported on Form 3CEB occurred in FY 2025-26 (April 1, 2025 to March 31, 2026). Every such transaction is, by definition, an “international transaction undertaken on or before March 31, 2026”. The full 1961 Act TP framework applies to it.

The TP filing calendar for FY 2025-26

Section-by-section preservation map

The following table maps each Chapter X provision of the 1961 Act to the FY 2025-26 application status and the corresponding 2025 Act successor section that will take over from FY 2026-27 onwards.

Section 92C ALP method selection: the five-method discipline holds

Section 92C(1) prescribes that ALP be determined using the most appropriate of these methods:

1. Comparable Uncontrolled Price (CUP) method (Rule 10B(1)(a)): preferred where reliable internal or external CUPs exist (price of identical or substantially similar goods/services in an uncontrolled transaction).
2. Resale Price Method (RPM) (Rule 10B(1)(b)): preferred for distribution / marketing-only entities adding limited value.
3. Cost Plus Method (CPM) (Rule 10B(1)(c)): preferred for contract manufacturing, contract R&D, captive service providers.
4. Profit Split Method (PSM) (Rule 10B(1)(d)): preferred where transactions are integrated and a one-sided method cannot reliably benchmark either party (intangibles, integrated trading, multi-party financial transactions).
5. Transactional Net Margin Method (TNMM) (Rule 10B(1)(e)): the most-used method in Indian TP. PLI options: OP/sales, OP/cost, OP/operating assets, Berry ratio.
6. Other Method (Rule 10AB, inserted by Notification 18/2012): valuation reports, bona-fide quotations, standard rate cards from independent agencies. Used where the prescribed five methods are not feasible.

The +/- 3 percent ALP tolerance band (1 percent for wholesale traders) under the second proviso to Section 92C(2) read with Rule 10CA continues for AY 2026-27. The arithmetic mean rule (multiple comparables) and the range concept (introduced for AY 2014-15 onwards under Rule 10CA(4)) both apply.

Master file (Form 3CEAA) and CbCR (Form 3CEAD): thresholds unchanged for FY 2025-26

The BEPS Action 13 documentation framework introduced in India by Finance Act 2016 under Section 92D(4) and Section 286 continues for FY 2025-26 exactly as drafted.

Master file (Form 3CEAA) threshold (Rule 10DA(1)):

• Indian entity is a constituent of an international group AND
• Consolidated group revenue exceeds Rs 500 crore in the immediately preceding accounting year (FY 2024-25 for FY 2025-26 filing) AND
• Either: aggregate value of international transactions exceeds Rs 50 crore, OR aggregate value of intangibles-related international transactions exceeds Rs 10 crore.

Country-by-country report (Form 3CEAD) threshold (Rule 10DB(6)):

• Consolidated group revenue exceeds Rs 6,400 crore (approximately EUR 750 million) in the preceding accounting year.
• Filed by the parent entity (resident in India) OR the alternate reporting entity OR (in the local-filing scenario) the Indian constituent.
• Filed within 12 months from the end of the reporting accounting year. For FY 2025-26 (ending March 31, 2026), Form 3CEAD is due March 31, 2027.

Form 3CEAC (Section 286(1) notification) is the prior notification of the reporting entity’s identity. For FY 2025-26 reporting, Form 3CEAC is due by January 31, 2027 (2 months before the 12-month CbCR deadline).

Safe harbour (Section 92CB) and APA (Section 92CC) continuity

The safe harbour scheme under Section 92CB read with Rules 10TA to 10THD continues exactly as in force on March 31, 2026. The Notification 22/2025 expansion (safe harbour margins notified for FY 2024-29 across software development, ITES, KPO, contract R&D, manufacturing, and intra-group loans/guarantees) remains in operation. Form 3CEFA election is filed with Form 3CEB for AY 2026-27 by October 31, 2026.

The APA programme under Section 92CC (and Rules 10G to 10T) operates unchanged. APAs already in force, including unilateral, bilateral, and multilateral APAs, continue to bind for the years covered. Rollback provisions under Section 92CC(9A) read with Rule 10MA (up to four prior years) continue to apply, with the rollback term governed by 1961 Act provisions for any year that ends on or before March 31, 2026.

Bilateral and multilateral APAs invoking competent authority involvement under Section 90 or 90A tax treaty MAP article continue to be processed by the Indian competent authority under the 1961 Act framework for FY 2025-26 transactions, with the 2025 Act’s successor provisions (Sections 165 to 175) governing post-April 1, 2026 transactions where the APA term spans the cutover.

Penalty exposure: what carries over

Five high-stakes scenarios for FY 2025-26 TP files

Scenario 1: Indian captive IT services subsidiary of a US parent. Cost-plus mark-up benchmarked under TNMM with OP/operating cost PLI. Safe harbour election possible if FY 2025-26 international transaction value is within the prescribed threshold and the mark-up is at or above the prescribed safe harbour margin (currently 17 percent for software development under Rule 10TD for the Rs 100 crore to Rs 200 crore band, lower margins for smaller bands per Notification 22/2025). Form 3CEFA elected with Form 3CEB by October 31, 2026 locks the safe harbour benefit, eliminates TPO reference under Section 92CA(2A), and avoids ALP scrutiny for the year.

Scenario 2: Indian distributor of foreign principal’s branded consumer goods. RPM is the natural method but where the Indian entity bears significant marketing intangibles (AMP / DEMPE issues post the LG Electronics, Sony Mobile, and Maruti Suzuki precedents), TNMM with Berry ratio or operating-asset-based PLI may be safer. Bright-line test for AMP intensity remains the Delhi High Court framework; FY 2025-26 benchmarking analysis under the 1961 Act framework holds.

Scenario 3: Indian manufacturing entity importing raw materials from group company. CUP / TNMM combination. If the Indian entity is a low-risk contract manufacturer, cost-plus is appropriate. If it has DEMPE functions, residual profit split may be necessary. APA-protected MNEs continue to apply the agreed methodology; non-APA MNEs face full ALP scrutiny under Section 92CA in due course.

Scenario 4: Indian holding company with intra-group financial transactions (loans, guarantees, cash pooling). Section 92B(1) Explanation (i)(c) read with the FY 2014-15 amendment captures these as international transactions. Benchmarking by CUP with credit-rating-adjusted yield curves; guarantee fee benchmarking by CUP / cost approach / yield approach (the SBI / Bharti Airtel ITAT precedents apply). For FY 2025-26, all such benchmarking is anchored in the 1961 Act framework.

Scenario 5: Indian entity falling within Specified Domestic Transaction (SDT) scope under Section 92BA. Post the Finance Act 2017 trim, SDT scope is limited to transactions under Section 80A / 80-IA(8) / 80-IA(10) / Section 10AA SEZ inter-unit transfers above Rs 20 crore aggregate. Indian groups with SEZ + non-SEZ units must continue Form 3CEB reporting for inter-unit SDTs at arms-length pricing for FY 2025-26.

Practitioner sprint: 8 steps before October 31, 2026

1. By July 15, 2026: Lock the international transaction inventory. Reconcile Form 3CEB transaction list with the audited financial statements and the books of account. Flag any new transaction types not present in FY 2024-25 (especially intra-group financial transactions, cost-sharing arrangements, intangibles licensing).
2. By August 1, 2026: Complete functional, asset, and risk (FAR) analysis for each tested party. Refresh the DEMPE analysis where intangibles are involved. Document any FY 2025-26 business-model change (new captive function, transfer of intangibles, supply-chain restructuring) that affects benchmarking.
3. By August 15, 2026: Update or refresh the benchmarking study. For TNMM, run the comparable search on the latest available financial year data (typically FY 2024-25 from Prowess / Capitaline). Apply quantitative + qualitative filters. Compute the interquartile range under Rule 10CA(4).
4. By August 30, 2026: Determine ALP. Apply the +/- 3 percent tolerance band (1 percent for wholesale traders) under the second proviso to Section 92C(2). Document the most-appropriate-method selection rationale.
5. By September 15, 2026: Prepare Form 3CEB. Cross-check transaction values against tax audit Form 3CD Clause 31 (related-party transactions disclosure) for consistency. Resolve any reconciliation difference before the September 30 tax audit deadline.
6. By September 30, 2026: File Form 3CD (tax audit). Form 3CD Clause 31, Clause 32A (deemed dividend), Clause 22 (40A(2)(b) payments to specified persons) all carry TP-relevant disclosures that must be consistent with Form 3CEB.
7. By October 15, 2026: Internal review and partner sign-off on Form 3CEB. Draft the safe-harbour election (Form 3CEFA) where the conditions are met. Notify the parent entity if Form 3CEAB (master file CE notification, due October 31) needs designation of the Indian entity as the master-file filer.
8. By October 31, 2026: File Form 3CEB and Form 3CEAB. File the income-tax return (ITR-6 / ITR-3 / ITR-5) under Section 139(1). For Master File filers, Form 3CEAA is due by November 30, 2026 (one month buffer).

Frequently asked questions

Q1. My company has an APA that was signed in 2024 for a 5-year term covering FY 2023-24 to FY 2027-28. The cutover happens mid-APA. Does the APA terminate on April 1, 2026?

No. APAs entered into under Section 92CC are binding contracts between the taxpayer and the Indian competent authority. Section 536 sub-clause 5 preserves Chapter X for FY 2025-26 transactions. For FY 2026-27 transactions (covered years that fall after April 1, 2026), the 2025 Act successor provisions (Section 168, the APA successor) will govern, but the substantive terms of the APA, the agreed methodology, the agreed ALP / margin, and the critical assumptions all continue without modification. CBDT FAQ 41 of the May 2026 FAQ tranche explicitly confirms APA continuity across the cutover.

Q2. We are filing Form 3CEB for AY 2026-27 in October 2026. Which form do we use, the 1961 Act version or the new 2025 Act version?

You file the existing Form 3CEB notified under Rule 10E of the Income-tax Rules 1962. Section 536 sub-clause 5 preserves the entire Chapter X procedural machinery for FY 2025-26 transactions, including the form architecture. CBDT has not notified a new Form 3CEB for AY 2026-27. The next iteration of the form would apply only to AY 2027-28 (FY 2026-27 transactions) filed in October 2027.

Q3. Our master file consolidated group revenue for FY 2024-25 was Rs 480 crore, below the Rs 500 crore threshold. We did not file Form 3CEAA last year. For FY 2025-26, group revenue is projected at Rs 540 crore. Do we file Form 3CEAA this year?

No, not for FY 2025-26 filing. The consolidated-revenue limb tests the IMMEDIATELY PRECEDING accounting year. For FY 2025-26 filing, the test year is FY 2024-25 where revenue was Rs 480 crore (below threshold). Re-test the threshold next year for FY 2026-27 filing, where the test year becomes FY 2025-26 (Rs 540 crore projected, threshold likely crossed if the projection holds and aggregate international transactions exceed Rs 50 crore).

Q4. The Income-tax Act 2025 changes the safe harbour margins. Does the new margin apply to FY 2025-26?

The Income-tax Act 2025 does not by itself change safe harbour margins. Safe harbour margins are prescribed by Rules 10TA to 10THD of the Income-tax Rules 1962, last amended by Notification 22/2025 (which set safe harbour margins for FY 2024-29). The Notification 22/2025 margins continue to apply for FY 2025-26 safe harbour elections under the 1961 Act Section 92CB framework. CBDT may issue a successor notification for FY 2026-27 onwards under the 2025 Act successor section (Section 167).

Q5. The TPO has issued a Section 92CA(3) notice on FY 2023-24 AY 2024-25 transactions in May 2026. Is the proceeding governed by the 1961 Act or the 2025 Act?

Section 536 sub-clause 5 preserves the 1961 Act provisions for “any international transaction undertaken on or before March 31, 2026 and any proceeding arising therefrom”. The TPO proceeding for AY 2024-25 transactions is by definition a “proceeding arising therefrom” and continues under Section 92CA of the 1961 Act. The TPO order is binding on the AO under Section 92CA(4), and the assessment / appellate route (CIT(A) under Section 246A / DRP under Section 144C / ITAT under Section 253) all proceeds under the 1961 Act framework.

Q6. We are evaluating a fresh APA application for FY 2026-27 onwards. Do we file under the 1961 Act or the 2025 Act?

A fresh APA application for the first covered year FY 2026-27 (a year that falls after April 1, 2026) is filed under the Income-tax Act 2025 successor provisions (Section 168, the APA section successor to Section 92CC). However, the procedural rules (Rule 10G to 10T of the Income-tax Rules 1962) continue to operate as the implementation framework until CBDT notifies replacement rules under the 2025 Act. CBDT has indicated in the May 2026 FAQ that the existing rules are deemed to be issued under the 2025 Act successor sections until formally replaced.

Disclaimer

This analysis is based on the Income-tax Act 1961 (as in force on March 31, 2026), the Income-tax Act 2025 (as assented to on April 1, 2026), the Income-tax Rules 1962, CBDT Circulars and Notifications as available as of May 26, 2026, and the CBDT 99-page transition FAQ released in April and May 2026. Transfer pricing is a fact-intensive area; the discussion above is a general practitioner advisory and does not constitute legal or tax advice on any specific transaction or taxpayer. Verify the latest CBDT notifications, judicial precedents, and rule amendments before applying any position. Section references are to the Income-tax Act 1961 unless explicitly noted.

Get expert guidance on your FY 2025-26 TP file

The transfer pricing cutover for FY 2025-26 sits at the intersection of three time pressures: the September 30 tax audit deadline, the October 31 Form 3CEB deadline, and the Income-tax Act 2025 cutover narrative. Practitioners with international transactions in the FY 2025-26 file should sequence the work to ensure benchmarking, FAR / DEMPE analysis, and ALP determination are signed off well before October 31. Schedule a Strategy Session with Tax Update India to walk through your FY 2025-26 transfer pricing approach, benchmarking refresh, safe-harbour election strategy, or APA continuity questions.

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CA Adityavikram Banka

Founder & Director at A S Banka Advisors Private Limited

The author is a Practicing CA, Founder of A. S. Banka Advisors Private Limited & Partner of Dhiraj & Dheeraj.

You can reach out to the author on : info@asbanka.com

www.asbanka.com

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