Specified domestic transactions under section 92BA: who is covered

Section 92BA of the Income-tax Act, 1961 defines a specified domestic transaction as one of the listed transactions, not being an international transaction, where the aggregate of such transactions in the year exceeds ₹20 crore. The list exists to stop profit being shifted into a business that pays less tax, such as a unit claiming a profit-linked deduction or a company on a concessional rate.

The third column is from section 164 of the Income-tax Act, 2025, which applies from tax year 2026-27 with the same ₹20 crore aggregate threshold.

Clause (i), which covered payments to related persons under section 40A(2)(b), was omitted by the Finance Act, 2017. Ordinary payments to directors, relatives or group companies are therefore not specified domestic transactions just because the parties are related. They can still be disallowed as excessive under section 40A(2)(b), but that is a separate test without transfer pricing documentation.

• Captive power plant. A cement company's power unit claims a section 80-IA deduction and supplies electricity to the company's own cement plant. The transfer price of that power, usually tested against the grid tariff, is a specified domestic transaction.
• SEZ unit and domestic unit. A company's SEZ unit claiming the section 10AA deduction sells components to the same company's domestic tariff area unit.
• New manufacturing company. A company taxed at the concessional rate under section 115BAB buys raw material from a group company. If the price is set to load profit into the low-tax company, the arrangement is caught.

In each case the test is the same as for an international transaction: the price must be at the arm's length price, using one of the six transfer pricing methods.

The threshold is the aggregate of all specified domestic transactions of the assessee in the year, not each transaction separately. Count the gross value of every transaction in the list. Below ₹20 crore, the transfer pricing provisions do not apply to these domestic dealings at all, although the underlying deduction provisions still require market value.

Take the captive power example. The power unit's deduction depends on its profit, and its profit depends on the price at which it "sells" electricity to the cement plant. If that price is above what the cement plant would pay the grid, the deduction is inflated. The usual comparable is the tariff at which the state distribution company would supply the same plant, adjusted for differences such as reliability, transmission losses and the time of supply. Where no outside price exists, the profit of the eligible unit is tested with TNMM against comparable independent companies.

Keep the tariff orders, the supply records and the working that ties the transfer price to them. The documentation standard is the same as for an international transaction.

• Keep transfer pricing documentation under Rule 10D, as for international transactions.
• Report the transactions in Part C of Form 3CEB, due one month before the return. See our Form 3CEB filing page.
• The same penalties apply: 2% of the transaction value for missing documentation, ₹1,00,000 for not filing Form 3CEB, and misreporting penalties on any adjustment.
• A domestic adjustment can also reduce the deduction claimed, because the eligible unit's profit is recomputed at arm's length.

Our transfer pricing services price specified domestic transactions at ₹49,999 for the study and report.