The Income-tax Rules, 2026 came into force on 1st April. For multinational groups operating in India, the transfer pricing chapter is the section that requires the closest reading.
The new framework, read with the Income-tax Act, 2025, rebuilds the safe harbour regime, the advance pricing agreement process, and the assessment cycle for international transactions. Transfer pricing has been the most litigated chapter of Indian direct tax for over a decade. The direction of these reforms is towards predictability and away from year-on-year benchmarking disputes for stable business models.
Expansion of the Safe Harbour Regime
The headline change is the expansion of the safe harbour regime. The transaction value threshold for information technology services has been raised from Rs 300 crore to Rs 2,000 crore, and a uniform safe harbour margin of 15.5 percent on operating expenses now replaces the earlier range of 17 to 24 percent across multiple sub-categories. This brings a substantially larger universe of Indian IT, ITES and global capability centre operations into safe harbour territory. The margin is fixed, however, and may exceed actual profitability in some cases, so opting in remains a commercial decision rather than a default position.
Block Assessments and Time-Bound APAs
Beyond safe harbour, two further changes carry immediate board-level relevance. A three-year block mechanism has been introduced under Section 92CA, allowing the arm's length price determined for one year to be extended to the next two consecutive years for similar transactions, subject to certification that there is no material change in method, functional analysis or business model. Unilateral advance pricing agreements are now subject to hard timelines, with cases required to be concluded within three years of filing.
The reforms are real, but the principal mechanisms are opt-in. Companies that do not actively consider their position against the new safe harbour, block assessment and APA options will remain on the same annual benchmarking cycle that these reforms were designed to move away from.