Transfer Pricing Services: TP Study, Benchmarking and Form 3CEB

Transfer pricing is the price one company in a group charges another for goods, services, loans, royalties or shared costs. Indian tax law requires every transaction between associated enterprises to be priced at arm's length: the price two unrelated parties would have agreed in the same circumstances. If the group price is lower or higher than that, the tax officer can substitute the arm's length price and tax the difference.

For FY 2025-26 the rules are in sections 92 to 92F of the Income-tax Act, 1961 and Rules 10A to 10E. From tax year 2026-27 the same framework continues under the Income-tax Act, 2025, with new section and form numbers: the accountant's report moves from Form 3CEB under section 92E to Form 48 under section 172.

Two enterprises are associated when one participates in the management, control or capital of the other, directly or through intermediaries. Section 92A(2) lists the deemed cases. They include holding 26% or more of the voting power, a loan of 51% or more of the borrower's total assets, a guarantee of 10% or more of its borrowings, and the power to appoint more than half its board.

Once you have any international transaction with an associated enterprise, a chartered accountant must certify it in Form 3CEB. When the aggregate value is above ₹1 crore, you must also keep the documentation set out in Rule 10D, usually called the TP study. Domestic related-party dealings come in only as specified domestic transactions above ₹20 crore.

Who must comply, and by when

The table below covers FY 2025-26, the last year under the 1961 Act. The return due date for transfer pricing cases is 30 November 2026, and Form 3CEB is due one month earlier. More on the Form 3CEB due date.

What counts as an international transaction

Section 92B covers almost any dealing with a non-resident associated enterprise: purchase or sale of goods, services rendered or received, royalties and licence fees, loans, interest, guarantees, cost-sharing arrangements, reimbursements, share issues and transfers, and business restructuring. A transaction with an unrelated party is also treated as international when an associated enterprise has a prior agreement with that party or decides the terms in substance. Nil-consideration transactions, such as interest-free loans or free services, still have to be reported.

The six methods for arm's length price

Section 92C and Rule 10B allow six methods: comparable uncontrolled price (CUP), resale price method, cost plus method, profit split method, transactional net margin method (TNMM) and any other method under Rule 10AB. You must choose the most appropriate method and record why the others were rejected. TNMM is the usual choice for Indian service providers and distributors, because reliable profit-level data on comparable companies is available in the Prowess and Capitaline databases. Our guide to transfer pricing methods has an example of each.

The arm's length range

Under Rule 10CA, when the method is CUP, resale price, cost plus or TNMM and there are at least six comparables, the arm's length price is a range from the 35th to the 65th percentile of the comparables' results. If your price falls inside the range, no adjustment is made. With fewer than six comparables, the arithmetic mean applies, with a tolerance of 3% (1% for wholesale traders). When comparables are selected on current-year data, data for the two preceding years may also be used. The arm's length price guide works through a full example.

Penalties for getting it wrong

A TPO adjustment also brings tax and interest on the adjusted amount. Where the adjustment exceeds ₹1 crore and the money is not brought back to India within 90 days, section 92CE treats the excess as an advance to the associated enterprise and imputes interest on it.

What changes under the Income-tax Act, 2025

From tax year 2026-27 the transfer pricing forms are renumbered under the Income-tax Rules, 2026. The mapping below is from the Income Tax Department's guidance on forms.

The Income-tax Rules, 2026 also give software development, IT-enabled services, KPO and software-related contract R&D a single safe harbour margin of 15.5% on operating expense, for up to ₹2,000 crore of such revenue (Rule 89). Our safe harbour rules guide has every margin and the Form 49 procedure.

What usually triggers a TPO reference

• Losses or thin margins alongside large associated enterprise transactions
• Royalty, brand or management fees paid abroad with little proof of benefit
• Interest-free or low-interest loans and free guarantees to overseas subsidiaries
• Heavy marketing spend by a distributor of the group's brand
• Year-end credit notes that move margins into the range
• Values in Form 3CEB that do not match the related party note in the accounts

Transfer pricing guides

• Arm's length price: the 35th to 65th percentile range, worked through
• Transfer pricing methods: CUP, RPM, CPM, PSM, TNMM and the other method
• Associated enterprise: the 13 tests in section 92A
• Form 3CEB due date: 31 October 2026 for FY 2025-26
• Safe harbour rules: the 2026-27 margins and Form 49
• Section 94B interest limitation: the 30% of EBITDA cap
• Specified domestic transactions: section 92BA and the ₹20 crore test
• Intercompany agreements: the clauses that matter

Keep the TP study, the benchmarking workings and the supporting documents for eight years from the end of the relevant assessment year. If the case is selected and referred to the TPO, the officer will ask for the documents first, and the time to produce them is short.

Next year we roll the study forward: refresh the comparables, update the FAR for any change in the business, and re-test the margins. If a margin is drifting out of the range during the year, we tell you before 31 March, while a pricing correction is still possible.