Transfer Pricing Under the Income-tax Act, 2025: Form 48, the Last Form 3CEB, and a Penalty That Became a Fee

Every October, a particular kind of email goes out from Indian subsidiaries of foreign groups: please send the global benchmarking study, the auditors need it by the 20th.

Transfer pricing is the discipline of proving that what an Indian company pays its foreign parent, for a licence, a loan, a service or a shipment of goods, is what two strangers would have agreed. The law has asked for that proof since 2001. From tax year 2026-27, it asks under a new Act, in a new form, and with a different price for being late.

Where the rules now live

Sections 92 to 92F of the 1961 Act are now Chapter X of the Income-tax Act, 2025, sections 161 to 173:

• 161: income from an international transaction or specified domestic transaction is computed at the arm's length price;
• 162, 163 and 164: what counts as an associated enterprise, an international transaction and a specified domestic transaction;
• 165 and 166: the methods of determining the price, and the reference to the Transfer Pricing Officer;
• 167 to 170: safe harbour rules, advance pricing agreements, and secondary adjustment;
• 171 and 172: the documents to be kept, and the accountant's report.

This year and next

Two reports are due on two dates a year apart, under two different Acts.

• For financial year 2025-26, the report is still Form 3CEB under the 1961 Act, due on 31 October 2026.
• For tax year 2026-27, it is Form 48, the report from an accountant under section 172, prescribed by rule 85. It is due one month before the return. Returns in transfer pricing cases are due on 30 November under section 263(1)(c), so Form 48 is due on 31 October 2027.

The penalty that became a fee

This is the change that has had the least attention.

Under section 447 of the 2025 Act as first enacted, the Assessing Officer may impose a penalty of ₹1,00,000 on anyone who fails to furnish the section 172 report. The Finance Act, 2026 omitted section 447 from 1 April 2026. In its place, section 428(d) now charges a fee:

• ₹50,000 for a delay of up to one month;
• ₹1,00,000 after that.

A penalty needed proceedings and could be argued against. A fee is simply payable. The same Finance Act did the same to the tax audit report under section 63: ₹75,000 for up to a month, ₹1,50,000 after.

The old penalty was a risk. The new fee is a certainty, and the first month is the cheaper one.

What has to be on file, and by when

Rule 84 of the 2026 Rules lists the documents that section 171 requires. Two parts of it matter most in practice.

• The ₹1 crore floor. Under rule 84(2), the prescribed documentation isn't required where the aggregate of international transactions in the books does not exceed ₹1 crore. Rule 84(3) still requires the income from those transactions to be shown to have been computed at arm's length.
• The deadline for the file. Rule 84(6) says the documents should be contemporaneous as far as possible and shall exist on the specified date, the date Form 48 is due. A benchmarking study commissioned after that date is, in the rule's terms, too late.

Specified domestic transactions come into the chapter only where their aggregate for the year exceeds ₹20 crore, under section 164.

The 2% penalties that remain

The fee covers a late report. The larger exposures are still penalties:

• section 442: 2% of the value of each transaction where the documents were not kept, the transaction was not reported, or the information was incorrect;
• section 457: 2% of the value of the transaction for not furnishing documents when asked for them in proceedings under section 171(2), which allows ten days, extendable by up to thirty more.

Work out your year

Before 31 October

• For 2025-26, finish Form 3CEB under the 1961 Act, and file it by 31 October 2026.
• For 2026-27, check that the documentation for transactions already made this year is being built as the year runs, since it must exist by 31 October 2027.
• Add up the specified domestic transactions. Below ₹20 crore, they stay out of the chapter.
• Put the new fee into the engagement letter and the client's calendar. It no longer depends on an officer's discretion.

Where this comes from

The law is from the Income-tax Act, 2025 as amended by the Finance Act, 2026: sections 161 to 173, 263(1)(c), 428(d), 442 and 457, with the Finance Act's footnote omitting section 447. The documentation and report rules are rules 84 and 85 of the Income-tax Rules, 2026 as published in the Gazette, G.S.R. 198(E), 20 March 2026. Reports for 2025-26 are under the 1961 Act, which governed that year.