CBDT APA Annual Report FY 2025-26: India Crosses 1,035 Advance Pricing Agreements, and Why Filing in March Costs You a Year

Quick Summary: The Five Things Worth Knowing

• India has crossed 1,000 Advance Pricing Agreements. CBDT’s Annual APA Report for FY 2025-26, released in July 2026, records 1,035 APAs entered into up to 31 March 2026, of which 220 were signed in FY 2025-26, the highest in any single year since the programme began in July 2012.
• The single most useful line in the report is a criticism of taxpayer behaviour. CBDT states that “almost all APA applications are filed in the month of March, a few days before the APA term begins, making it virtually impossible to get an APA before the term begins.” It asks taxpayers to file in April of the preceding year instead. Filing four weeks differently can buy you a full year of certainty.
• The APA versus Safe Harbour dilemma has been resolved in the taxpayer’s favour. By an Office Memorandum dated 24 March 2026, CBDT introduced a Critical Assumption into unilateral APAs so that a taxpayer can take an APA for years before 1 April 2026 and still opt into the new Safe Harbour regime from tax year 2026-27 onward. You no longer have to choose.
• The statutory home has moved. Under the Income-tax Act, 2025, in force from 1 April 2026, the APA provisions sit at Section 168 (advance pricing agreement) and Section 169 (effect to advance pricing agreement), with safe harbour at Section 167, transfer pricing officer reference at Section 166 and arm’s length price at Section 165. CBDT has revised its model APA template to bridge the two Acts.
• An APA is still slow. Median time to conclusion is 36 months for a unilateral APA and 38 months for a bilateral APA. In FY 2025-26 about 45 percent of unilateral and 25 percent of bilateral APAs closed within 24 months. Plan the timeline as part of the decision, not after it.

What the CBDT Annual APA Report FY 2025-26 Actually Says

The Central Board of Direct Taxes publishes an annual report on its Advance Pricing Agreement programme. The FY 2025-26 edition, dated July 2026 and issued by the Department of Revenue, Ministry of Finance, is a 74 page document that goes well beyond the press release. It contains the year wise application tables, the disposal pipeline, the covered years, the treaty partner breakdown, and a chapter titled “Looking ahead” that is unusually candid about what taxpayers are doing wrong.

For a founder with a foreign parent, an Indian subsidiary paying management fees to an overseas group company, an IT or engineering services company billing a related party abroad, or a family office holding structure with cross border royalties, this is the document that tells you whether the certainty mechanism is worth using and how long it will take.

The headline numbers

One number in that table deserves more attention than the record signings. 841 applications are still under processing, of which 198 were filed in FY 2025-26 itself and 159 in FY 2024-25. The pipeline is long and it is getting longer at the front end. That is the practical context for everything below.

The Timing Mistake Almost Every Applicant Is Making

Chapter 5 of the report contains a passage that reads like a memo from CBDT to the profession. It is worth quoting in full because it converts directly into billable advice:

“Currently, almost all APA applications are filed in the month of March, a few days before the APA term begins, making it virtually impossible to get an APA before the term begins. The early filing of APA application, say in April itself of the earlier year, can help to kick-start the APA process even before the APA period begins, making it a truly advanced agreement. In nearly 45% of UAPAs and nearly 25% of BAPAs, the agreement was signed within 24 months in FY 2025-26. Therefore, the APA programme can strive to provide tax certainty to taxpayers within the first APA year, i.e. before the return for the first year is filed, in such a scenario. In particular, early filing of renewal applications hold the key to continuous, uninterrupted tax certainty.”

Read that arithmetic carefully. An application may be filed any time before the beginning of the first year of the APA term. If you file in March 2027 for a term beginning 1 April 2027, and the median conclusion is 36 months, you get your agreement somewhere in 2030, three returns into the covered period. If you file in April 2026 for the same term, you have eleven extra months in hand, and on the 24 month curve for unilateral cases you have a realistic chance of holding the signed agreement before the return for the first covered year is even due.

The renewal point is sharper still. An APA runs for a maximum of five consecutive tax years. If your existing APA expires on 31 March 2028 and you file the renewal in March 2028, you have created a certainty gap that will run for years. Diary the renewal filing for the April that is two years before expiry, not the March that is two weeks before it.

APA or Safe Harbour? CBDT Has Now Said You Can Have Both

This was a genuine dilemma for a large part of the applicant pool through FY 2025-26, and the report explains why.

A significant number of unilateral APA applicants are IT services providers. Their applications typically straddle tax years before 1 April 2026, where the new safe harbour regime does not apply, and tax years from 2026-27 onward, where it does. Many were at an advanced stage of negotiation when the Budget 2026 safe harbour announcement landed. The question they put to CBDT was blunt: if we sign this APA, do we forfeit the new safe harbour for later years?

CBDT’s answer, by Office Memorandum dated 24 March 2026, is no. A Critical Assumption is now introduced into unilateral APAs which enables revision of the APA so that it does not apply to transactions covered by the safe harbour. In the report’s own framing, a taxpayer whose APA period spans tax years beginning both before and on or after 1 April 2026 “can enter into APAs, and thereby get the tax certainty for earlier years, without losing its right to avail the new Safe Harbours prospectively.”

On the safe harbour regime itself, the Ministry of Finance has stated that the Finance Act 2026 consolidated multiple technology service segments into a single “Information Technology Services” category carrying a uniform 15.5 percent margin, and raised the eligibility threshold from Rs 300 crore to Rs 2,000 crore. That threshold increase is the change that matters most to a scaling services business: a company that had outgrown safe harbour at Rs 300 crore of eligible transactions is now back inside the regime with a great deal of headroom.

Where the APA Provisions Now Live: The Income-tax Act, 2025 Map

The Income-tax Act, 2025 came into force on 1 April 2026 and renumbered the transfer pricing chapter. If you are drafting an application, an annual compliance report or a modified return this year, use the table below rather than the section numbers in your 2024 precedents.

The substantive architecture of Section 168 is unchanged in effect. The Board, with the approval of the Central Government, may enter into an APA determining the arm’s length price or the manner of its determination for an international transaction, or the income attributable to Indian operations of a non resident under Section 9(2). The agreement is valid for a period not exceeding five consecutive tax years. It binds both the taxpayer for the covered transaction and the Principal Commissioner or Commissioner and all subordinate income tax authorities in respect of that taxpayer and that transaction. It ceases to bind if there is a change in law or facts bearing on it, and the Board may declare it void ab initio if it was obtained by fraud or misrepresentation, in which case the intervening period is excluded from limitation with a sixty day floor.

CBDT has also revised its model APA template, last revised in March 2024, to reference the new sections for modified return, annual compliance report, compliance audit, secondary adjustment, and revision and cancellation of APAs. If you are working from an older template, replace it.

The Section 169 deadline people miss

This is the one to put in the compliance diary the day an APA is signed. Where a return for a tax year covered by the APA has already been furnished before the agreement was entered into, the taxpayer must furnish a modified return, in accordance with and limited to the agreement, within three months from the end of the month in which the agreement was entered into. That is Section 169(1) of the Income-tax Act, 2025.

The consequences that follow are equally worth knowing. If assessment or reassessment proceedings for a covered year were completed before the modified return was filed, the Assessing Officer passes an order modifying total income, within one year from the end of the financial year in which the modified return was furnished. If those proceedings were pending, the Assessing Officer completes them in accordance with the agreement, and the limitation period is extended by twelve months.

Because APA terms typically cover years for which returns have already gone in, the modified return is not an edge case. It is the normal consequence of signing, and a three month window from the end of a month is easy to lose in a handover.

Rollback: How Five Years Becomes Nine

Rollback provisions allow the arm’s length price, or the methodology agreed in the APA, to be applied to years before the APA term begins. In India, rollback runs to a maximum of four years prior to the first year of the APA period. Combined with a five year forward term, a single application can therefore deliver certainty across up to nine years at one time.

The uptake is real but far from universal. Of the 136 unilateral APAs signed in FY 2025-26, 46 carried a rollback term, contributing 149 rollback years against 680 APA years. Of the 284 bilateral APAs signed since inception, 119 have rollback provisions.

If you have open transfer pricing assessments for earlier years on the same transaction, rollback is usually the highest value part of the application, and it is the part that gets dropped when an application is prepared in a hurry in March.

Should Your Business Consider an APA? A Practical Filter

1. Is the transaction recurring and material? An APA prices a transaction forward for five years. A one off intra group sale is not a candidate. Ongoing software development services, IT enabled services, contract research, management or intra group services, royalties, and intra group financing or guarantees are the categories the programme is actually built around, and the report confirms the service sector dominates the caseload.
2. Has the same transaction already been adjusted, or is it likely to be? If the Transfer Pricing Officer has made adjustments on the same margin in past years, the combination of an APA plus rollback can close the historic exposure and the forward exposure in one instrument.
3. Is there a treaty partner on the other side? A bilateral APA takes longer, a median 38 months, but it is the only route that also protects you against double taxation in the counterparty jurisdiction. If the overseas entity is in the United States, the United Kingdom, Singapore, Japan, Australia, Denmark, Finland, France, Indonesia, Ireland, South Korea or Sweden, India signed bilateral APAs with all of those competent authorities in FY 2025-26.
4. Would safe harbour do the job faster? After the Finance Act 2026 changes, and with the eligibility threshold raised, a services company inside the safe harbour margin may get its certainty in weeks rather than years. The 24 March 2026 Office Memorandum means testing safe harbour first no longer forecloses the APA route for earlier years.
5. Can you sustain the compliance? An APA carries an annual compliance report and a compliance audit for every covered year. It is a five year relationship, not a filing.
6. Can you file in April? If the honest answer is that the file will not be ready until March, consider deferring the APA term by a year and filing early for the later term instead of filing late for the earlier one.

Frequently Asked Questions

How long does it take to get an APA in India?

The median time recorded in the CBDT Annual APA Report FY 2025-26 is 36 months for a unilateral APA and 38 months for a bilateral APA. In FY 2025-26, nearly 45 percent of unilateral APAs and nearly 25 percent of bilateral APAs were signed within 24 months.

How many years does an APA cover?

Section 168(4) of the Income-tax Act, 2025 provides that the agreement is valid for a period not exceeding five consecutive tax years, as specified in the agreement. With rollback for up to four prior years, the maximum span of certainty from one application is nine years.

Can I take an APA and still use the new Safe Harbour regime?

Yes, for unilateral APAs. By Office Memorandum dated 24 March 2026, CBDT introduced a Critical Assumption enabling revision of the APA so that it does not apply to transactions included in safe harbour, which allows a taxpayer to secure certainty for years before 1 April 2026 without giving up the right to opt into the new safe harbour prospectively.

What do I have to file after my APA is signed?

If a return for a covered tax year was already furnished before the agreement was entered into, a modified return limited to the agreement must be filed within three months from the end of the month in which the agreement was entered into, under Section 169(1) of the Income-tax Act, 2025. An annual compliance report and a compliance audit apply for each covered year.

Which sections of the Income-tax Act, 2025 govern APAs?

Section 168 provides for the advance pricing agreement itself and Section 169 for giving effect to it. Safe harbour rules sit at Section 167, reference to the Transfer Pricing Officer at Section 166, and computation of arm’s length price at Section 165.

Is an APA binding on the tax officer?

Yes. Section 168(5) of the Income-tax Act, 2025 makes the agreement binding on the person in whose case it is entered, in respect of the covered transaction, and on the Principal Commissioner or Commissioner and the income tax authorities subordinate to him. It ceases to be binding if there is a change in law or facts bearing on the agreement.

Related Reading on TaxUpdate.in

• CBDT FAQ Deep-Dive Series #5: Transfer Pricing Transition Under the Income-tax Act 2025
• AS 22 Amendment 2026: No Deferred Tax on the OECD Pillar Two Global Minimum Tax
• Foreign Assets Now Appear in Your AIS: Reconciling AEOI Data and Schedule FA

Source and Verification Note

Primary domain and primary instrument. Every figure, quotation and programme fact above is taken from the report itself: Advance Pricing Agreement (APA) Programme, APA Annual Report FY 2025-26, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, New Delhi, July 2026, 74 pages. The document was retrieved on 14 August 2026 from incometaxindia.gov.in, the Department’s own domain, at /documents/d/guest/apa-report2025-26-2-pdf. The file’s internal metadata records a creation date of 23 July 2026, consistent with the stated month of issue.

Safe harbour margin and threshold (the 15.5 percent uniform Information Technology Services margin and the increase in the eligibility threshold from Rs 300 crore to Rs 2,000 crore) are taken from the Ministry of Finance press release of 31 March 2026 on pib.gov.in, retrieved 14 August 2026. The Annual Report refers to the new safe harbour regime but does not restate the margin or the threshold, so these are cited to the press release, not to the report.

Income-tax Act, 2025 section numbers (165, 166, 167, 168, 169, 170) were each verified individually against the enacted text before use, and the operative content of Sections 168 and 169 summarised above is drawn from that text.

Two discrepancies, stated openly rather than smoothed over. First, the Ministry of Finance press release of 31 March 2026 records 219 APAs signed in FY 2025-26 and a cumulative 1,034; the Annual Report, published later, records 220 and 1,035. We use the report’s figures as the settled position and note that the report’s own status table flags that the cumulative count includes two cases carrying both bilateral and unilateral components. Second, the press release names 13 treaty partners including New Zealand, while the report’s Highlights name 12 and do not include New Zealand. We have listed the twelve that both documents agree on and have not asserted the thirteenth.

Not asserted. The APA filing fee structure under the Income-tax Rules, 2026 is reported in secondary commentary as having been made uniform, but the report describes the reform only as “uniform filing fees” without stating an amount, so no figure is given here. Confirm the current fee against the Rules before filing. The rule numbers of the new APA Scheme under the Income-tax Rules, 2026, which replace Rules 10F to 10T of the Income-tax Rules, 1962, are likewise not stated because the report does not carry them.

Get Expert Guidance

If your Indian entity has a recurring related party transaction with an overseas group company, the question is not whether transfer pricing will be examined but when, and on whose numbers. An APA moves that argument to the front of the period instead of the back of it, and the report is explicit that the applicants who file in April get a materially better outcome than the ones who file in March. Schedule a strategy session and we will assess whether an APA, a safe harbour election, or neither is the right instrument for your structure.

Disclaimer: This article is published by Tax Update India for general information and does not constitute tax, legal or professional advice. It reflects the CBDT Annual APA Report FY 2025-26 and the statutory position as available on 14 August 2026. Transfer pricing outcomes are fact specific, and the applicable law, rules, forms and fees may change. Take advice on your own facts before filing an application or relying on any position stated here.

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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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