The rules laid down under Section 92E of Income Tax Act stand mandatory for entities that take part in international or certain specified domestic transactions. The Section 92E rules apply to associated enterprises. There are certain criteria as per which their transactions fall under the above-mentioned categories. If you own a multinational business that operates in India, it is important for you to be aware of the rules and regulations under Section 92E, so that you can file the returns. This article will help you understand what Section 92E is, different kinds of transactions, the penalties associated with Section 92E, and more.
Latest Update
The deadline for filing ITR for FY 2024-25 (AY 2025-26) has been extended to 15 September 2025 from the earlier date of 31 July 2025 for non-audit taxpayers. If this deadline is missed, a belated return can still be filed by 31 December 2025 with applicable penalties and interest.
What is section 92E of income tax act?
Section 92E of the Income Tax Act pertains to the requirement for taxpayers engaged in international or specified domestic transactions to obtain a transfer pricing report from an accountant. This section ensures that transactions between related entities are conducted at arm’s length prices and are compliant with the tax regulations in India. The report must detail the transfer pricing policies, methods, and financial transactions conducted between related parties during the financial year.
Any taxpayer who has entered into international transactions or specified domestic transactions, as defined under the Income Tax Act, is required to file the transfer pricing report. This includes companies, firms, or any other business entities that deal with related parties. The report must be submitted to the Income Tax Department in Form 3CEB by the specified due date to avoid penalties. This ensures transparency and compliance with transfer pricing regulations and helps prevent tax avoidance through mispricing of transactions between related entities.
What is the meaning of international transactions as per section 92B?
The meaning of international transaction as per Section 92B can be defined as a transaction which fulfils the conditions written below:
- A transaction that is done between two or more enterprises
- A transaction wherein at least one enterprise is a non-resident of India
Additionally, the nature of an international transaction has to be of:
- Sales, lease, or a purchase of an intangible or tangible property, or lending or borrowing money, or provision of services
- A mutual agreement or arrangement between more than two associated enterprises, wherein the terms of the transaction are pre-determined just as the cost allocation
On another note, do not forget to check out the new income tax slab rates, and keep up with the new rules introduced.
What is the meaning of associated enterprises as per section 92A?
Your enterprise could be termed an associated enterprise as per Section 92A if:
- You are involved in an enterprise where the same people participate in administration, control, or capital, either directly, indirectly, or through intermediaries, as they do in another similar enterprise.
- Your company controls at least 26% of the voting power in another company, whether directly or indirectly.
- A person or business owns, either directly or indirectly, 26% of the voting power in both businesses.
- Your company has provided a loan to another company, which represents at least 51% of the other company’s total assets' book value.
- Your company guarantees at least 10% of the total borrowings of another company.
- You have the authority to appoint more than half of the board of directors or one or more executive directors in both businesses.
- The same person or persons can appoint more than 50% of the directors or members of the governing board, or one or more executive directors or members of the governing board.
- Your company’s business is entirely dependent on the know-how, copyright, patent, or secret formula of another company.
- The other enterprise supplies 90% or more of the raw materials and consumables required by your enterprise.
- The products or articles produced by your company are sold to another company, with prices and other terms influenced by that company.
- If an individual controls your business, that individual also controls the other business, either directly, indirectly through a relative, or jointly with their relative.
- Your company owns at least 10% of another company, such as a partnership firm, an AOP, or a BOI.
- There is a mutual interest link between your business and another business.
What is the meaning of specified domestic transactions as per section 92BA?
Previously, transfer pricing laws were only applicable to cross-border transactions. However, the Finance Act of 2012 expanded the scope to include certain domestic transactions involving related parties within the country. Here is a breakdown of which transactions are now classified as specified domestic transactions:
- Any transaction mentioned under section 80A.
- Any transfer of goods or services referred to under section 80-IA(8).
- Any business conducted between you and a third party as defined in section 80-IA(10).
- Any transaction covered under any other section of Chapter VI-A or section 10AA, subject to the provisions of section 80-IA(8)/(10).
- Any business conducted between the individuals listed in section 115 BAB(4).
- Any other transactions that may be deemed necessary.
These transactions become significant when your total specified domestic transactions in the previous year exceed the prescribed amount of Rs. 20 crore. If this threshold is surpassed, you will be required to comply with transfer pricing requirements for all transactions, regardless of the individual transaction values.
Applicability and compliance requirements under Section 92E
- Applies to all taxpayers engaged in international or specified domestic transactions with associated enterprises.
- Requires obtaining a transfer pricing audit report from a Chartered Accountant and submitting it in Form 3CEB by the due date.
- Due date for filing Form 3CEB is generally 30 November following the end of the financial year (e.g., 30 November 2025 for AY 2025-26).
- Non-compliance attracts a penalty of Rs. 1,00,000 under Section 271BA.
- As per Section 92(3), transactions that increase losses or reduce income tax liability are exempt from Section 92E compliance.
- The Finance Act, 2009 introduced safe harbour rules allowing declared transfer prices to be accepted under certain conditions, applicable to some domestic transactions.
Provisions of Section 92E
Section 92E of the Income Tax Act mandates that any taxpayer involved in international or specified domestic transactions must file a transfer pricing report with the tax authorities. This provision ensures that such transactions are carried out at arm's length prices, in accordance with the fair market value, preventing tax evasion or avoidance. The report must be submitted in Form 3CEB, and failure to do so within the prescribed deadline can result in penalties.
Documentation requirements (Rule 10D) for Section 92E compliance
- MNC group profile with tax residence details.
- Ownership structure of associated enterprises.
- Details of services and property transferred.
- Terms and nature of transactions.
- Industry and business descriptions.
- Records of uncontrolled transactions.
- Functional and risk analysis.
- Methodology and data used to determine the arm’s length price.
- Transfer price adjustments.
Who is required to file under Section 92E?
Taxpayers engaged in international transactions or specified domestic transactions with related parties are required to file the transfer pricing report. This includes entities such as companies, firms, or other business organisations that have financial dealings with their affiliates, subsidiaries, or other related parties. The section applies to both domestic and foreign transactions.
How to submit Form 3CEB for Section 92E?
The report must be submitted in Form 3CEB, which is a certification by an accountant detailing the arm’s length nature of the transactions. This form must be filed within the specified due date, typically along with the income tax return for the relevant assessment year, to ensure compliance.
Penalties for non-compliance
Failure to file the required report within the prescribed deadline attracts penalties under the Income Tax Act. The penalty for non-compliance can range from Rs. 1,00,000 to higher amounts, depending on the severity of the breach.
Section 92E of Income Tax Act Filing Deadlines
The filing deadline for Section 92E of the Income Tax Act is the same as the due date for filing the income tax return under Section 139(1), which typically falls on 30th November for companies. Any delay in submitting the Form 3CEB attracts penalties as per the Income Tax Act.
Importance of Section 92E
The filing deadline for Section 92E of the Income Tax Act is aligned with the due date for filing the income tax return under Section 139(1). For companies, this due date generally falls on 30th November of the assessment year. This means that businesses engaged in international or specified domestic transactions with related parties must submit their transfer pricing report in Form 3CEB by this date.
Form 3CEB is a certification by an accountant that confirms the transactions between related entities were conducted at arm’s length. The report ensures compliance with transfer pricing regulations to prevent tax avoidance.
Failure to submit Form 3CEB within the specified deadline can result in significant penalties. These penalties may range from Rs.1,00,000 to higher amounts, depending on the extent of the delay or non-compliance. Therefore, it is crucial for taxpayers to adhere to the filing deadline to avoid financial consequences.
What is the penalty for not furnishing a report u/s 92E?
If you fail to submit the required report, you will be held liable and may face penalties. Section 271BA specifically addresses the penalties for not furnishing the report mandated under Section 92E. Under Section 271BA, a fine of Rs. 1 lakh can be imposed on you if you fail to provide a report from an accountant as required by Section 92E. Additionally, Section 271AA imposes a penalty if you fail to maintain and keep the necessary information and documents related to international transactions. These sections cover the penalty provisions for international transactions in general.
Guidance note on report under section 92e of the Income Tax Act 1961
The Guidance Note on Report Under Section 92E of the Income Tax Act 1961 provides detailed instructions for preparing and submitting the transfer pricing report in Form 3CEB. It is issued by the Institute of Chartered Accountants of India (ICAI) to assist taxpayers and professionals in complying with the requirements of Section 92E. The guidance note outlines the responsibilities of the accountant in verifying and certifying the arm's length nature of international and specified domestic transactions between related parties, ensuring that the transactions align with transfer pricing provisions.
The note also elaborates on the format and content of the report, including the necessary disclosures and information required to be furnished. This includes details about the taxpayer, their related parties, the nature of the transactions, and the method used for determining arm’s length prices. It also provides clarity on the documentation and records that must be maintained to support the report. The guidance note aims to simplify the filing process and ensure compliance with transfer pricing regulations.
Who is liable for audit under Section 92E?
Section 92E of the Income Tax Act applies to Associated Enterprises (AEs) engaged in international or specified domestic transactions. Businesses are classified as AEs if they meet any of the following conditions:
- Individuals participate in the administration, control, or capital of the other company directly, indirectly, or via intermediaries.
- One entity controls at least 26% of voting power in the other enterprise, directly or indirectly.
- Any person or entity holds 26% or more voting power in both companies.
- Loans from one entity to another represent 51% or more of the latter’s total assets.
- One business guarantees at least 10% of the other’s total borrowings.
- Ability to appoint one or more executive directors or over 50% of the board in either company.
- Common individuals appoint key governing or executive members in both entities.
- Business dependency on intellectual property or know-how of the other.
- At least 90% of raw materials are sourced from the other company.
- Products sold to another enterprise with prices/terms set by the buyer.
- Common control by an individual (including jointly with relatives).
- One enterprise owns 10% or more of another (BOIs, AOPs, partnership firms).
- Existence of mutual interest between enterprises.
Steps to ensure compliance with section 92E
Determine applicability of Section 92E
Assess whether your business has engaged in international or specified domestic transactions with related parties. If so, the transfer pricing report in Form 3CEB is mandatory.
Maintain accurate documentation
Keep detailed records of all international and specified domestic transactions, including agreements, invoices, and pricing methodologies. This will help demonstrate that the transactions were conducted at arm’s length.
Hire a qualified accountant
Engage a qualified accountant who is well-versed with transfer pricing regulations. The accountant will be responsible for certifying the arm’s length nature of the transactions in Form 3CEB.
Prepare Form 3CEB
Complete the transfer pricing report in the prescribed format of Form 3CEB. Include all necessary details such as related party information, transaction nature, pricing method, and supporting documents.
File Form 3CEB on time
Submit the completed Form 3CEB by the due date, typically aligned with the income tax return deadline, usually by 30th September for companies.
Review and audit compliance
Regularly review your transfer pricing documentation and ensure it complies with the regulations. Audit your related party transactions to ensure they align with the prescribed arm’s length pricing method.
Monitor penalties for non-compliance
Be aware of the penalties for late filing or non-compliance with Section 92E. Timely submission helps avoid financial consequences.
Conclusion
To conclude, Section 92E of Income Tax Act, 1961, mandates that anyone involved in international or specified domestic transactions must obtain and submit an audit report from a chartered accountant. The section's provisions cover transactions involving at least two Account Executives, one of whom must be a non-resident. Additionally, as outlined in Section 92BA, these requirements extend to specified domestic transactions, ensuring comprehensive compliance across both international and domestic dealings.
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