A S BANKA ADVISORS

If your Indian company bills a foreign group entity for engineering, product, support or management work, transfer pricing is not a question of whether your margin gets examined. It is a question of when, and on whose numbers. An Advance Pricing Agreement moves that argument to the front of the period instead of the back of it. CBDT’s Annual APA Report for FY 2025-26 is out, and its most useful passage is not a record statistic. It is a criticism of how taxpayers file.

The programme is now large enough to be a real option

As at 31 March 2026, CBDT has entered into 1,035 APAs since the programme began in July 2012, being 751 unilateral and 284 bilateral. 220 were signed in FY 2025-26 alone, the highest in any single year, including 84 bilateral APAs against a previous record of 65. Cumulatively the programme has delivered 5,732 years of tax certainty and, on CBDT’s estimate, brought about Rs 51,000 crore of income to finality.

Now the number nobody puts in a press release. Of 2,277 applications filed since inception, 1,436 are disposed and 841 are still under processing. Median time to conclusion is 36 months unilateral, 38 months bilateral. Any advice that treats an APA as a quick fix is wrong.

The timing mistake, in CBDT’s own words

Chapter 5 reads like a memo from the Board to the profession: “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.”

Work the arithmetic. File in March 2027 for a term starting 1 April 2027 and, on a 36 month median, you hold the signed agreement around 2030, three returns into the covered period. File in April 2026 for that same term and you gain eleven months. In FY 2025-26 nearly 45 percent of unilateral and 25 percent of bilateral APAs closed within 24 months, which makes it realistic to hold the agreement before the first covered year’s return is even due.

It bites hardest on renewals. An APA runs for a maximum of five consecutive tax years. If yours expires on 31 March 2028 and you file the renewal in March 2028, you have manufactured a certainty gap that runs for years. Diary renewals for the April two years before expiry, not the March two weeks before it. That is a calendar change, not a legal one, and it is free.

You no longer have to choose between an APA and safe harbour

A large share of unilateral applicants are IT and IT-enabled services companies whose APA terms straddle tax years before 1 April 2026, where the new safe harbour regime does not apply, and years from tax year 2026-27, where it does. Many were deep in negotiation when the Budget 2026 changes landed, and asked the obvious question: if we sign, do we forfeit the new safe harbour later?

By Office Memorandum dated 24 March 2026, the answer is no. A Critical Assumption is now introduced into unilateral APAs enabling revision so the APA does not apply to transactions covered by safe harbour. In the report’s words, such a taxpayer “can enter into APAs, and thereby get the tax certainty for earlier years, without losing its right to avail the new Safe Harbours prospectively.” You can therefore test safe harbour first at no strategic cost. Under Finance Act 2026 the technology service segments were consolidated into a single Information Technology Services category at a uniform 15.5 percent margin, and the eligibility threshold rose from Rs 300 crore to Rs 2,000 crore. A business that had outgrown safe harbour at Rs 300 crore is back inside the regime with real headroom.

Use the right section numbers this year

The Income-tax Act 2025 came into force on 1 April 2026 and renumbered the transfer pricing chapter, so your 2024 precedents now carry the wrong citations.

• Arm’s length price: Section 165 (was Section 92C)
• Reference to Transfer Pricing Officer: Section 166 (was Section 92CA)
• Safe harbour rules: Section 167 (was Section 92CB)
• Advance pricing agreement: Section 168 (was Section 92CC)
• Effect to advance pricing agreement: Section 169 (was Section 92CD)
• Secondary adjustment: Section 170 (was Section 92CE)

Section 168 is unchanged in effect: an APA is valid for a period not exceeding five consecutive tax years and binds the taxpayer for the covered transaction as well as the Principal Commissioner or Commissioner and all subordinate authorities. CBDT has also revised its model APA template, last revised March 2024. If you are working from an older one, replace it.

The deadline that gets lost in a handover

Where a return for a covered tax year was already furnished before the agreement was entered into, a modified return, in accordance with and limited to the agreement, must be filed 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. If assessment for a covered year was already completed, the Assessing Officer passes a modification order within one year from the end of the financial year in which the modified return was furnished. If proceedings were pending, they are completed in accordance with the agreement and limitation extends by twelve months. Since APA terms routinely cover years for which returns have already gone in, this is the normal consequence of signing. Diary it the day you sign.

Rollback is where the value usually sits

Rollback applies the agreed price or methodology to a maximum of four years before the APA term begins. With a five year forward term, one application can cover up to nine years at once. Uptake is thin: of the 136 unilateral APAs signed in FY 2025-26, only 46 carried a rollback term. If you have open transfer pricing assessments on the same transaction for earlier years, rollback is usually the highest value part of the application, and the first thing dropped when a file is assembled in a hurry in March.

One more filter: only a bilateral APA protects you against double taxation in the counterparty jurisdiction. In FY 2025-26 India signed bilateral APAs with 12 treaty partners, including first-ever agreements with France, Ireland, Indonesia and Sweden alongside the US, the UK, Singapore, Japan, South Korea, Australia, Denmark and Finland.

What to do this quarter

1. List every recurring related-party transaction with an overseas group entity, with three years of values. Material and repeating means APA candidate.
2. Test safe harbour first, against the 15.5 percent margin and the Rs 2,000 crore threshold. Since the March 2026 Office Memorandum, testing costs you nothing.
3. If an APA is right, target an April filing, and diary renewals two years ahead of expiry.
4. Check whether rollback can close historic exposure on the same transaction, and build it in rather than bolting it on.

Two figures we deliberately do not state: the APA filing fee under the Income-tax Rules 2026, and the new rule numbers replacing Rules 10F to 10T of the 1962 Rules. The report describes the reform only as “uniform filing fees” and carries neither. Confirm both against the Rules before filing.

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Sources: Annual APA Report FY 2025-26, CBDT, Ministry of Finance, July 2026 (74 pages), retrieved from incometaxindia.gov.in on 15 August 2026; PIB release of 31 March 2026 (PRID 2247399) for the safe harbour margin and threshold, which the report itself does not restate; Sections 165 to 170 of the Income-tax Act 2025 verified against the enacted text. One discrepancy, stated openly: the March 2026 press release records 219 APAs, a cumulative 1,034 and 13 treaty partners including New Zealand; the later Annual Report records 220, a cumulative 1,035 and names 12. We follow the report.

Need help navigating this? If your structure carries a recurring cross-border related-party transaction, we can assess whether an APA, a safe harbour election, or neither is the right instrument, and whether an April filing is achievable for the next term. Book a call: https://calendly.com/asbanka-info/30min

CA Adityavikram Banka, Founder, A S Banka Advisors Private Limited.