The Central Board of Direct Taxes (CBDT) has achieved a milestone by entering into 219 Advance Pricing Agreements (APAs) with Indian taxpayers in the fiscal year 2025-26. This brings the total number of APAs to 1,034 since the program’s inception. Among these agreements, there are 750 unilateral APAs (UAPAs) and 284 bilateral APAs (BAPAs).
The bilateral APAs were established through mutual agreements with 13 of India’s treaty partners, including the US, Finland, the UK, Singapore, Japan, and others. Notably, this year marked the first-ever bilateral APAs between India and France, Ireland, Indonesia, and Sweden. The CBDT has been consistently increasing its APA signings, concluding 174 APAs in the previous financial year and 125 in the year before that.
Complementing the APA framework are the Safe Harbour Rules, which provide a quicker and cost-effective option for ensuring transfer pricing certainty. Introduced in 2013, the Safe Harbour framework sets fixed margins for specific international transaction categories. Currently, there are twelve transaction categories covered, such as IT services, software services, and more.
The Finance Act of 2026 has brought significant improvements to the Safe Harbour Rules. Various technology service segments have been merged into a single “Information Technology Services” category with a standard 15.5% margin. The eligibility threshold has been raised from Rs 300 crore to Rs 2,000 crore. These amendments aim to create a more automated and system-driven framework, reducing the need for extensive scrutiny and administrative involvement.
The APA Scheme, in conjunction with the Safe Harbour Rules, seeks to offer taxpayers certainty in transfer pricing by defining pricing methods and establishing the arm’s length price of international transactions in advance for up to five years. Additionally, BAPAs provide protection against potential or actual double taxation.
