When to obtain the accountant’s report
Section 92E of the Income-tax Act, 1961 and Rule 10E require a person who entered into an international transaction or a specified domestic transaction (SDT) during the previous year to obtain and furnish the prescribed accountant’s report. The accountant examines the accounts and records, reports on the prescribed records based on that examination, and gives an opinion on the annexure. The report does not bind the Assessing Officer or certify an assessment outcome.
Under Section 92B(1), an international transaction involves associated enterprises (AEs), of which either or both are nonresidents, and falls within the statutory categories. Profit or a minimum transaction value is not a condition of Section 92E. Rule 10D(2) relaxes detailed recordkeeping where aggregate international transaction book value does not exceed ₹1 crore, but arm’s length substantiation and the reporting duty remain. Under Section 92B(2), check both deemed-transaction routes: a prior agreement between the third party and the AE, or terms determined in substance between them, with the statutory nonresidence condition.
For SDTs, Section 92BA requires aggregate value over ₹20 crore for the specified categories, excluding international transactions. Its scope includes eligible Section 80A, 80-IA and related Chapter VI-A or Section 10AA transactions, and business covered by Sections 115BAB(6) and 115BAE(4). Ordinary domestic related-party expenses do not qualify merely because parties are related.
Under Section 92F(iv), the specified date is one month before the applicable Section 139(1) return due date. The standard transfer pricing calendar for these legacy filings is 31 October for the report and 30 November for the return; check any extension and whether it covers the report, the return or both. For FY 2025–26 (AY 2026–27), use the forms under the 1961 Act. For tax years governed by the Income-tax Act, 2025, Section 172 and Rule 85 prescribe Form 48; apply the new Act’s specified date provisions and do not carry over the old clause numbering.
Read the actual Form 3CEB annexure
| Part or clause | What to report or reconcile |
|---|---|
| Part A, 1–7 | Name, address, tax identifier, nature of business, status, previous year end and assessment year. |
| Part A, 8–9 | Aggregate international and specified domestic transaction values, respectively, as per the books. |
| Part B, 10 | List the associated enterprises and the required relationship and entity details. |
| 11 | Tangible property, including purchases, sales and the specified lease disclosures. |
| 12 | Purchase, sale, transfer, lease or use of intangible property. |
| 13 | Services, such as software development or management support, by the relevant category. |
| 14 | Lending or borrowing and the financing balances or instruments covered by the clause. Keep the agreement, currency, interest and supporting terms. |
| 15 | Guarantee transactions. Keep the terms, exposure, currency and charge; assess the legal and economic effect of a comfort letter before classifying it. |
| 16 | Marketable securities and the covered equity and convertible instruments or transactions. Separate reporting questions from any income adjustment. |
| 17 | Mutual arrangements allocating or apportioning costs for a benefit, service or facility. |
| 18 | Relevant business restructurings or reorganisations not already specifically reported. |
| 19 | Other international transactions not reported more specifically elsewhere. |
| 20 | Deemed international transactions. Apply the full Section 92B(2) test. |
| Part C, 21 | List the associated enterprises and relationship and business details for SDTs. |
| 22 | Transfers to, or acquisitions from, other businesses of the taxpayer by covered eligible units or businesses. |
| 23 | Business transactions involving more than ordinary profits where Section 80-IA(10) or Section 10AA applies. |
| 24 | Covered Section 115BAB(6) transactions. |
| 25 | Covered Section 115BAE(4) transactions, added by the March 2024 amendment. |
| 26 | Other reportable specified domestic transactions. |
Report book figures, arm’s length amounts and method where requested by the relevant field. Use the prescribed form edition and its instructions. A financing contract may require workpapers for tenor, security and benchmark conventions even where the form does not have a dedicated field. Do not count one charge twice by reporting it both as a service and as an “other” transaction.
Select the most appropriate method for the actual facts
| Method | Metric and practical test |
|---|---|
| Comparable uncontrolled price (CUP) | Compare uncontrolled prices or rates; adjust for material differences where possible. |
| Resale price | Start from the resale price to an independent party and apply a comparable gross margin and prescribed adjustments. |
| Cost plus | Use relevant direct and indirect costs and a comparable gross mark-up; align cost classifications. |
| Profit split | Allocate relevant combined profits by relative contributions where the method fits the facts. |
| Transactional net margin (TNMM) | Compare net operating margins against an appropriate base such as costs or sales after examining functions, assets and risks. |
| Other method | Rule 10AB looks to a price charged or paid, or that would have been charged or paid, for a comparable uncontrolled transaction. Support the chosen valuation and assumptions. |
For CUP, resale price, cost plus and TNMM with at least six eligible dataset entries, Rule 10CA can provide the 35th to 65th percentile range. Check the detailed dataset construction and calculation. Database filters are evidence choices, not universal prescribed filters. Keep separate the mandatory report, detailed group Master File and country-by-country reporting; each has its own statutory tests and deadline.
Penalty and secondary adjustment checks
| Provision | What it addresses |
|---|---|
| Section 271BA | The Assessing Officer may direct ₹1 lakh for failure to furnish the Section 92E report. |
| Section 271AA(1) | Specified recordkeeping, reporting or accuracy failures can attract 2% of the value of each affected transaction. On a ₹50 crore affected transaction that is ₹1 crore. |
| Section 271G | Failure to furnish information or documents required under Section 92D(3) can attract 2% of the relevant transaction value for each such failure. |
| Section 273B | Reasonable cause may prevent specified penalties if proved, including under Sections 271AA, 271BA and 271G. |
| Section 270A | Under-reporting and misreporting involve distinct statutory tests and penalty rates of 50% and 200% of the relevant tax, respectively. Examine the transfer pricing exclusion and the applicable provisions before assuming a penalty or immunity. |
| Section 92CE | Separate secondary adjustment mechanism, including imputed interest or the optional additional tax where applicable; these are distinct from the reporting penalties. |
Six worked examples
All examples are fictional. Rates, comparables, filing dates and exchange rates are assumptions unless an applicable statutory rule is stated.
1. Software services: TNMM and the range
For FY 2024–25, Zenon India’s costs are ₹40 crore and its service revenue from its US AE is ₹46 crore. It earns ₹6 crore, or 15% of cost. Assume the functional analysis supports an Indian tested party and 12 eligible, ascending OP/cost observations: 8%, 9.5%, 10.5%, 11.5%, 12.5%, 13.6%, 14.8%, 16.8%, 18%, 19%, 20% and 21%. Under the stated Rule 10CA assumptions the fifth and eighth entries give 12.50% and 16.80%, and the sixth and seventh average to 14.20%. The actual 15% is in range, so the ₹46 crore price is accepted for this illustration. Report the services in clause 13.
2. US-dollar intercompany loan
Bharat Petrochem lends USD 10 million from 1 April 2024 for a full year at 3%. Assume a supported USD CUP analysis gives a base of 5.30% and a credit spread of 2.20%, or 7.50%. These are illustrative rates, not historical SOFR fixings. The lender’s 9% INR financing cost is not by itself a comparable USD lending rate. Match currency, tenor, credit, security and other terms. At ₹83 per USD, contractual interest of USD 300,000 is ₹2,49,00,000; USD 750,000 at the benchmark is ₹6,22,50,000. The difference is ₹3,73,50,000. Report the financing in clause 14 and reconcile the corresponding tax treatment separately.
3. Guarantee given at no charge
Apex gives a full-year corporate guarantee for its foreign subsidiary’s USD 50 million credit line and charges nothing. Section 92B’s explanation includes guarantees within capital financing. At an assumed ₹83 per USD, guaranteed exposure is ₹415 crore. If reliable comparable evidence supports an annual fee of 1%, the illustrated arm’s length fee and difference from actual are ₹4,15,00,000. Report the guarantee in clause 15. The example rate is not a mandatory rate for all guarantees. An eligible safe harbour election, if made, is a separate analysis.
4. Captive power transfer by an eligible unit
Assume Surya Solar’s eligible unit validly began operations within the statutory period and FY 2024–25 falls within its elected Section 80-IA deduction years. At ₹8 per unit its ₹25 crore internal transfer represents 3,12,50,000 units. The applicable aggregate SDT value exceeds ₹20 crore. Assume evidence supports ₹4.50 per unit as the comparable market price for this supply; a tariff is not automatically comparable. The benchmark value is ₹14,06,25,000 and the deduction difference, assuming other inputs do not change, is ₹10,93,75,000. Report this covered internal transfer in clause 22.
Assume the domestic company’s FY 2022–23 turnover or gross receipts exceeded ₹400 crore and it is in the normal 30% rate category for AY 2025–26 and both taxable bases are above ₹10 crore with no marginal relief, so 12% surcharge and 4% cess give an incremental 34.944% rate. The illustrative tax increase is ₹3,82,20,000. Do not combine the Section 80-IA deduction assumption with a Section 115BAA rate that disallows that deduction.
5. Unreported software licence
OmniTech omitted a reportable ₹30 crore licence transaction with an Irish affiliate. Under Section 271AA(1), 2% gives a potential penalty of ₹60 lakh if imposed. Record the contract, reporting explanation and any reasonable-cause evidence. A pricing adjustment, interest or a Section 270A penalty has to be tested separately.
6. Accepted primary adjustment and later repatriation decision
Matrix accepts a ₹5 crore adjustment relating to an INR-denominated raw-material import for FY 2023–24, in an AO assessment order dated 31 December 2024. Clause 11 is the transaction disclosure; the accountant’s report is not the assessment order. Under Rule 10CB the 90-day date is 31 March 2025. If the balance remains outstanding beyond it, imputed interest starts from the applicable order date. With an illustrative SBI one-year MCLR of 8.50% plus 3.25 percentage points, 11.75% gives ₹58.75 lakh for a full year on ₹5 crore. Use the actual applicable annual rate and outstanding period for a filing.
The optional 18% additional tax on an outstanding ₹5 crore, with 12% surcharge on the tax and 4% cess on the subtotal, gives 20.9664% or ₹1,04,83,200. Interest stops for the amount covered from the payment date; interest already imputed is not erased.
Electronic filing and reconciliation
Reconcile transaction figures to books and agreements and keep the pricing and method workpapers. The department’s Form 3CEB instructions describe assigning the form to the registered CA in the portal, completion and submission by the CA using the supported filing workflow, and taxpayer approval and verification through the Worklist. Check the supported utility and verification method for the year. Download the completed form and acknowledgement, and reconcile the figures and any tax adjustments with the applicable return fields. A draft or a submission waiting for taxpayer action is not a completed filing.
Frequently asked questions
Does loss remove the reporting requirement?
No. Check whether a reportable transaction occurred, then assess the pricing and documentation independently.
What if international transactions total ₹10 lakh?
If reportable, they still trigger Section 92E. The ₹1 crore detailed-documentation relaxation is separate and does not eliminate arm’s length substantiation.
Is a reimbursement at cost automatically excluded?
No. Identify the actual transaction and relationship, and report it where required under the appropriate category. A reimbursement can belong with the underlying service or cost arrangement; clause 19 is for residual items. Keep invoices, allocation evidence and support for any at-cost treatment.
Does a safe harbour election replace Form 3CEB?
No. Check the election, eligible transaction, applicable year and benchmark separately. The statutory reporting requirement remains.
Can an incorrect report be corrected?
Check the prescribed form edition and available filing type with the accountant. If the portal and applicable procedure allow a revised report, reconcile the correction and complete the taxpayer verification step; a revised submission does not by itself settle timeliness or penalties.
How long should the legacy local records be retained?
Rule 10D(5) requires the specified records to be kept for eight years from the end of the relevant assessment year. Consider separately any continuing proceedings or other applicable retention requirements.
Sources
- Income-tax Act, 1961: Sections 80-IA, 92A–92F, 115BAA, 139 and applicable penalties
- Income Tax Department: prescribed Form 3CEB and annexure, including the March 2024 amendments
- Income Tax Department: Rules 10B, 10CA and 10D and transfer pricing guidance
- Income Tax e-Filing: Form 3CEB FAQs
- Income Tax e-Filing: offline statutory forms manual
- ICAI guidance note on the report under Section 92E
- Supreme Court: Jindal Steel & Power and market value of captive electricity
- Income-tax Act, 2025: sections 171–173 and 536
- Notified Income-tax Rules, 2026: Rule 85 and Form 48
- Finance Act, 2026: amended penalty and immunity provisions and tax rates
- Finance Act, 2025: corporate rates, surcharge and cess