India's Income Tax Department has published its FY 2025-26 Annual APA Report, highlighting record Advance Pricing Agreement signings, reforms under the Income Tax Act 2025 and Income Tax Rules 2026, and changes to the transfer pricing safe harbor regime aimed at improving tax certainty. 

RF Report

India’s Income Tax Department has released the Advance Pricing Agreement (APA) Programme Annual APA Report FY 2025-26, detailing record activity under the country’s APA programme, legislative reforms that took effect on 1 April 2026, and progress in the Mutual Agreement Procedure (MAP) programme. The report also outlines changes designed to improve tax certainty for businesses engaged in cross-border transactions.

The report covers developments under the Income Tax Act 2025 and Income Tax Rules 2026, which introduced a reorganised legal framework for APAs through Section 168 and Rules 103 to 120.

Record APA activity

The Central Board of Direct Taxes (CBDT) signed 220 APAs during FY 2025-26, the highest annual total since the programme began in 2012. This increased the cumulative number of APAs signed to 1,035 by March 2026.

The year also marked a record for Bilateral APAs (BAPAs), with 84 agreements concluded, exceeding the previous annual high of 65. India also signed its first bilateral APAs with France, Indonesia, Ireland and Sweden.

According to the report, the median resolution period was 36 months for Unilateral APAs (UAPAs) and 38 months for BAPAs.

Legislative and administrative reforms

The report outlines several reforms introduced under the Income Tax Act 2025 and Income Tax Rules 2026 to simplify APA administration.

Under Rule 109(3), fact-finding activities for UAPA applications should, where possible, be completed within one year from the end of the financial year in which an application is admitted.

Rules 109(13) and 109(14) introduce a two-year timeline for concluding UAPA applications where the primary covered transaction involves the provision of Information Technology (IT) services. Applicants may request an extension of up to six months, while the standard conclusion period for other UAPA applications remains three years.

The reforms also modify return filing requirements through Section 169, allowing APA signatories and associated enterprises affected by an APA to file a return or modified return in accordance with, and limited to, the agreement.

The APA filing fee has been standardised at INR 2 million (20 lakh), replacing the previous slab-based fee structure linked to transaction value.

New APA forms introduced

The report notes that several legacy forms have been replaced with new documentation designed to simplify compliance:

  • Form 50 – Pre-filing consultation form.
  • Form 51 – APA application form, allowing a combined APA and rollback application with simplified documentation requirements.
  • Form 52 – Annual compliance and adjustments form, including tabular APA adjustment reporting, PLI computation disclosure and a critical assumptions checklist.
  • Form 54 – Renewal application form requiring only incremental documentation for APA renewals.

Transfer pricing safe harbor changes

The report highlights transfer pricing safe harbor reforms announced in Union Budget 2026.

These include a unified safe harbor profit margin of 15.5% for all IT services, with a reduced margin of 15.0% for data centre services. The turnover threshold for eligibility has also increased from INR 3 billion to INR 20 billion (300 crore to 2,000 crore). The applicable safe harbor rates are contained in Rule 89.

To address APA applications covering periods before and after the safe harbor changes that took effect on 1 April 2026, the CBDT introduced a “critical assumption” provision. This allows taxpayers to enter into an APA for earlier years while retaining the option to adopt the safe harbor regime prospectively. Where the safe harbor is selected, the APA is revised so that it no longer applies to transactions covered by the safe harbor rules.

Sector and international trends

The report states that the service sector remained the largest user of the APA programme, particularly captive companies providing software development and IT-enabled services (ITeS).

APAs also covered manufacturing, royalties, management support services and interest on borrowings.

The United States remained India’s principal treaty partner for BAPAs, followed by the United Kingdom, Japan and Singapore.

Progress in the MAP programme

The Mutual Agreement Procedure (MAP) programme also recorded improvements.

The inventory of pending MAP cases declined from 947 in 2020 to 365 by the end of 2025, representing a reduction of nearly 60%.

The average time required to resolve transfer pricing MAP cases fell from 64.86 months in 2016 to 39.78 months. The report also notes that India and Japan received OECD recognition in 2024 for cooperation in transfer pricing MAP cases.

Programme impact

According to the report, the APA programme has provided certainty for more than 5,500 Assessment Years and helped prevent or resolve over 2,800 transfer pricing matters.

The report estimates that the 1,035 signed APAs have finalised taxation on income of approximately INR 51,000 crores, resulting in around INR 15,000 crores in litigation-free tax revenue while contributing to greater certainty for taxpayers engaged in cross-border transactions.