When a secondary adjustment applies
A primary adjustment aligns the price of an international transaction with the arm’s length price and increases the taxpayer’s income or reduces its loss. A secondary adjustment aligns the actual allocation of funds and the corresponding accounts with that primary adjustment. Under the Income-tax Act, 1961, Section 92CE governs this treatment. These worked examples relate to years governed by the 1961 Act. For tax years beginning on or after 1 April 2026, see Section 170 of the Income-tax Act, 2025 and Rule 83 of the Income-tax Rules, 2026; Section 536 governs the transition.
The first proviso to Section 92CE(1) excludes primary adjustments of ₹1 crore or less in a previous year, and separately excludes adjustments for AY 2016–17 and earlier. Apply the monetary test for the relevant year. For example, three qualifying additions of ₹40 lakh for the same year total ₹1.20 crore, above the historical cutoff. Section 170(1) uses an inclusive cutoff of ₹1 crore or more for the new law.
The excess money is the difference between the arm’s length price determined in the primary adjustment and the price actually used. If a covered balance is not brought to India in time, the law deems the outstanding amount an advance to the associated enterprise (AE) and imputes interest. The old and new Acts allow repatriation from any of the taxpayer’s nonresident AEs.
What starts the 90 days
| Primary adjustment trigger | Section 92CE(1) | Starting date under Rule 10CB | Practical step |
|---|---|---|---|
| Voluntary adjustment in return | (i) | Applicable Section 139(1) return due date | Confirm any extension for the year. |
| Accepted assessment adjustment | (ii) | Date of the applicable Assessing Officer or appellate authority order | Identify the operative order and document what is accepted. |
| APA entered into on or before return due date | (iii) | Date the Section 139(1) return was filed | For interest after default, Rule 10CB(3) instead uses the applicable return due date. |
| APA entered into after return due date | (iii) | End of the month in which the APA was entered into | Track the separate modified return deadline. |
| Adjustment under elected safe harbour | (iv) | Applicable Section 139(1) return due date | Track safe harbour election and remittance separately. |
| Mutual agreement procedure (MAP) under a tax treaty | (v) | Date the Assessing Officer gives effect to the resolution under Rule 44H | Keep the order giving effect. |
For the historical APA trigger, the agreement must have been entered into under Section 92CC on or after 1 April 2017. The time to file a modified return under Section 92CD, where applicable, is three months from the end of the signing month. It does not start the 90 days. Rule 83 retains the six timing scenarios, but for an APA entered into on or before the return due date it starts the 90 days at the applicable Section 263(1) due date. It also uses that due date for voluntary adjustments and safe harbour, and Rule 121(10) for the MAP order.
A standalone Transfer Pricing Officer order or an Assessing Officer’s draft in the Section 144C process does not establish that the taxpayer accepted the adjustment. If disputed, check the operative assessment or appellate order, which adjustments are accepted, and which remain in dispute. The rule does not impose one blanket clock measured from final disposal of every possible appeal.
Imputed interest and the currency benchmark
If an outstanding amount misses the 90-day deadline, Rule 10CB(3) charges interest from the relevant starting date in the table, except that the early APA case uses the applicable return due date for interest. Rule 83(3) similarly uses the starting date in its table. Use the denomination of the underlying international transaction, the prescribed annual benchmark for each relevant period and the actual outstanding balance. Allocate income to the relevant years. For foreign-currency transactions, the rules also prescribe the telegraphic transfer buying rate at the end of the year of the transaction for the specified INR conversion.
The examples assume an SBI one-year MCLR of 8.50% in each relevant year; this is an illustration. The 325 basis point spread gives 11.75%. The historical foreign-currency text in Rule 10CB uses six-month LIBOR as of 30 September of the relevant previous year plus 300 basis points. The remaining synthetic US dollar LIBOR settings ended on 30 September 2024. Where the prescribed historical benchmark is unavailable, do not substitute another rate based on this guide; check the treatment for the specific year and currency before computing or filing.
Under Rules 83 and 89(3) of the 2026 Rules, use the listed reference rate for the currency as of 30 September of the relevant tax year, then add 300 basis points. The table combines that 300-point spread with any adjustment already embedded in the Rule 89 reference rate. Benchmark numbers shown are illustrative and are not published fixings. For a currency absent from the list, confirm the applicable treatment rather than assuming a proxy.
| Transaction currency | Underlying benchmark | Total spread | Assumed benchmark | Illustrative annual rate |
|---|---|---|---|---|
| Indian rupee (INR) | One-year SBI MCLR at 1 April | 3.25 percentage points | 8.50% | 11.75% |
| US dollar (USD) | Six-month Term SOFR | 3.45 percentage points | 5.20% | 8.65% |
| Euro (EUR) | Six-month EURIBOR | 3.00 percentage points | 3.60% | 6.60% |
| Pound sterling (GBP) | Six-month Term SONIA | 3.30 percentage points | 5.00% | 8.30% |
| Japanese yen (JPY) | Six-month Tokyo Term Risk Free Rate (TORF) | 3.10 percentage points | 0.25% | 3.35% |
| Australian dollar (AUD) | Six-month Bank Bill Swap Rate (BBSW) | 3.00 percentage points | — | — |
| Singapore dollar (SGD) | Six-month compounded SORA | 3.45 percentage points | — | — |
Choosing between repatriation and the additional tax
Once the prescribed period has expired, Section 92CE(2A) permits an election to pay 18% additional income tax on the excess money or outstanding part. In the historical examples, 12% surcharge on the tax and 4% Health and Education Cess on tax plus surcharge produce an effective rate of 20.9664%. Sections 92CE(2B) and (2C) respectively bar further credit for the tax and deduction for the amount on which it was paid. Section 92CE(2D) ends the requirement for secondary adjustment and imputed interest on that amount from the date of payment; the earlier interest remains. Section 170(5)–(8) provides a corresponding option for the new law.
| Decision factor | Imputed interest on outstanding balance | Additional tax election |
|---|---|---|
| Cash outflow | Corporate tax on imputed interest at the taxpayer’s applicable rate. | Upfront additional tax on the amount covered, plus surcharge and cess. |
| Settlement | Repatriation stops interest on the amount received. | Payment stops interest on the amount covered from the payment date. |
| Records | Track remaining balances, rates and remittances by year. | Keep evidence of payment and reconcile any earlier imputed interest. |
| Illustrative break-even | At 11.75% interest and 25.168% corporate tax, annual tax is about 2.96% of the principal. | 20.9664% divided by the annual cost gives about 7.09 years without discounting or balance changes. |
| Other constraints | Check liquidity, bank evidence and local remittance rules. | Optional even when remittance is commercially difficult; model cash flows and constraints. |
Exchange controls, lender covenants or insolvency can affect the group’s ability to remit. Check the specific restriction and possible remittance by another nonresident AE. The example break-even assumes a flat balance, rates and no discounting. An actual comparison also needs payment dates, the cost of funding, possible part-remittances and any interest already incurred.
Six worked examples
The companies and facts below are illustrative. Interest uses simple actual days divided by 365, counting from the trigger and excluding the receipt or tax payment date. The examples round amounts to the nearest rupee for presentation. Where used, the illustrative Section 115BAA effective tax rate is 25.168% (22% plus 10% surcharge and 4% cess).
1. Voluntary adjustment and timely cash repatriation
For FY 2023–24, Zenon India’s cost base is ₹62.50 crore. Its 16% arm’s length margin exceeds the 12% invoiced margin by four percentage points. The voluntary adjustment in its 30 November 2024 return is ₹2.50 crore, giving incremental corporate tax of ₹62,92,000 at the assumed rate. The adjustment exceeds ₹1 crore. CBDT Circular 18/2024 extended the return deadline for the applicable transfer pricing filers to 15 December 2024; 90 days later is 15 March 2025. The parent remits USD 301,205 on 15 February 2025. At an illustrative ₹83 to the dollar this is about ₹2.50 crore (₹2,50,00,015 before charges). Assuming the Indian bank credit covers the entire balance, no interest is imputed. Retain the actual bank credit and transaction reference.
2. Missed deadline and interest across two financial years
Keep the same ₹2.50 crore adjustment but assume the underlying service is INR denominated and the full balance is received on 31 August 2025. Missing the 15 March deadline triggers interest from 15 December 2024. At the assumed 11.75% annual rate, 107 days in FY 2024–25 give ₹8,61,130 of interest and 152 days in FY 2025–26 give ₹12,23,288. Combined imputed interest is ₹20,84,418; at 25.168%, the illustrative incremental tax is ₹2,16,729 and ₹3,07,877 respectively, or ₹5,24,606 combined.
3. Additional tax on the entire balance
BPO accepts a ₹10 crore adjustment in its 15 December 2024 assessment order for FY 2021–22. Assume the transaction was INR denominated and remittance cannot be arranged. The deadline is 15 March 2025. At 11.75%, a full year’s imputed interest would be ₹1,17,50,000, with ₹29,57,240 of illustrative income tax at 25.168%. On 20 March 2025, BPO pays the additional tax: ₹1,80,00,000 base plus ₹21,60,000 surcharge and ₹8,06,400 cess, or ₹2,09,66,400. The 95-day prepayment period still gives ₹30,58,219 of illustrative imputed interest (₹7,69,693 of income tax at the assumed rate). The election does not eliminate that income or confer immunity from review.
4. APA rollback and two distinct deadlines
OmniTech signs a bilateral APA on 15 September 2024 covering five prospective years and four rollback years, FY 2020–21 to FY 2023–24. Assume ₹3 crore of INR-denominated adjustment in each rollback year, totaling ₹12 crore, and that the applicable return due dates for the first three rollback years preceded signing. For earlier years with returns already filed, the Section 92CD modified return deadline is 31 December 2024. For years signed after the applicable original due date, the repatriation clock starts 30 September, giving a 29 December deadline. A 20 December receipt is timely for those years. A 10 March 2025 receipt would be late and the 161-day illustration is ₹15,54,863 per affected ₹3 crore balance.
For FY 2023–24 itself, the applicable transfer pricing due date in this example is 15 December 2024, so the September APA precedes that date. Assume the company filed its original return on 15 December 2024; the 90 days then end on 15 March 2025 and the 10 March receipt is timely for that year. If the taxpayer had not yet furnished its original return when it signed the APA, the Section 92CD modified return obligation does not arise for that return. Confirm the due date and return status separately for each covered year.
5. Partial repatriation and tax on the remainder
Alpha BioPharma accepts an INR-denominated ₹8 crore adjustment in an assessment order dated 1 October 2024. The 90 days end on 30 December 2024. It receives ₹5 crore on 20 December, so no interest is imputed on that portion. It pays the additional tax on ₹3 crore on 15 January 2025: ₹62,89,920. That remainder also gives ₹10,23,699 of imputed interest for 106 days under the assumptions, or ₹2,57,644 of illustrative corporate tax. The combined incremental tax for the outstanding balance is about ₹65,47,564, apart from tax on the original adjustment.
6. Objections to a draft assessment
A Transfer Pricing Officer issues an order for a ₹15 crore adjustment on 15 October 2024. Assume Matrix Telecom, an eligible assessee, receives the Assessing Officer’s draft order on 25 October and files objections with the Dispute Resolution Panel and the Assessing Officer on 10 November. That is 16 days after receipt, within the 30-day window under Section 144C(2). On these facts there is no accepted Assessing Officer adjustment to start the Section 92CE(1)(ii) clock based on the TPO order. If a later assessment or appellate order becomes operative, check what was accepted and recompute the timeline for that part. The additional tax is an election available on qualifying late balances.
Compliance controls
Before filing, identify the adjustment by year and by underlying transaction; ask treasury to check funds and remittance evidence. Record the applicable return deadline and any extension. For assessment cases, track the draft, objection receipt and later orders separately. If full repatriation is doubtful, compare the option and interest routes before the deadline and update the analysis when balances or rates change. Reconcile the working papers, bank evidence, applicable income tax return and accountant’s report using the notified forms for the year. Keep bank references in the file even when the return does not call for them.
Frequently asked questions
Does this apply to specified domestic transactions?
The excess-money definition and the interest rule concern international transactions. A specified domestic transaction alone is outside this mechanism.
Can a journal entry alone count as repatriation?
The statute requires repatriation to India. Keep reliable evidence of receipt and reconcile the intercompany balance; a book entry alone does not establish that funds were received in India. A proposed set-off needs analysis of its facts and legal effect before being treated as repatriation.
Can another group company remit?
Yes, the Act allows the money to be repatriated from any nonresident AE of the taxpayer. Keep evidence connecting that payment to the specific balance.
Does the additional tax create a foreign tax credit?
Section 92CE(2B) bars further credit under the Indian provision. The Indian rule does not determine another jurisdiction’s treaty or domestic credit entitlement.
What about AY 2016–17 or a hardship extension?
The first proviso to Section 92CE(1) excludes AY 2016–17 and earlier, subject to the statutory no-refund proviso for tax paid under the pre-amendment provision. Rule 10CB gives no general power to extend the 90 days for commercial hardship.
What if an appellate order deletes the primary adjustment?
Reconcile the surviving primary adjustment and consequential imputed interest with the order giving effect. Section 92CE characterizes the optional additional tax payment as final on the covered amount. Do not assume an automatic refund of that payment or statutory refund interest; evaluate the order and applicable refund provisions.
Sources
- Income-tax Act, 1961: sections 92CC–92CE, 115BAA, 139 and 144C
- Income Tax Department: transfer pricing guidance and Rule 10CB
- CBDT Notification 52/2017: original Rule 10CB and benchmarks
- CBDT Notification 76/2019: amended Rule 10CB
- CBDT Circular 18/2024: AY 2024–25 return deadline
- Finance Act rate provisions: surcharge and cess
- UK Financial Conduct Authority: final cessation of LIBOR
- Income-tax Act, 2025: sections 170 and 536
- Notified Income-tax Rules, 2026: Rules 83 and 89