The Central Board of Direct Taxes reported a record intake and resolution of Advance Pricing Agreement applications in financial year 2024–25, marking a significant strengthening of India's transfer pricing certainty framework. The APA programme — established under Sections 92CC and 92CD of the Income Tax Act 1961 and the APA Rules (Rules 10F to 10T of the Income Tax Rules 1962) — provides multinational corporations with upfront certainty on the transfer pricing methodology applicable to their related party transactions. For Delhi NCR-based multinationals and their holding structures, the APA programme offers a powerful tool to manage transfer pricing risk in India's historically active enforcement environment.
FY2025 Programme Statistics
The CBDT's annual APA report for FY2024–25 recorded 287 new APA applications filed — the highest in a single year since the programme's inception. Of these, 189 were unilateral APAs (involving India alone) and 98 were bilateral APAs (involving India and a treaty partner jurisdiction). The CBDT concluded 204 APAs during the year — 162 unilateral and 42 bilateral — also a record. The rollback provisions under Rule 10MA were applied in 78% of concluded APAs, providing taxpayers with certainty for up to 4 preceding years in addition to the prospective 5-year APA period.
The jurisdictions with the highest bilateral APA activity were the United States (27 concluded), Japan (15 concluded), and the United Kingdom (12 concluded). The Mutual Agreement Procedure (MAP) statistics for FY2025 show 512 cases pending, with 143 cases resolved during the year — an improvement in MAP throughput that partly reflects CBDT's investment in dedicated MAP staff and its compliance with BEPS Action 14 MAP transparency reporting.
Pricing Methodology Trends
The TNMM (Transactional Net Margin Method) continues to dominate accepted APA methodologies, accounting for approximately 67% of concluded APAs. The CUP (Comparable Uncontrolled Price) method was accepted in 18% of cases, primarily for commodity transactions and financial service fee arrangements. The PSM (Profit Split Method) was applied in 9% of cases, concentrated in cases involving unique contributions by both transacting entities — particularly in software development and R&D arrangements. The CBDT's acceptance of PSM for digital services and IP arrangements is a positive signal for technology-driven business models, though the CBDT's documentation requirements for PSM cases remain demanding.
The target operating margin accepted for routine service providers — captive software development, back-office support, data processing — has remained in the 12–18% net margin range, broadly consistent with the ranges accepted in the 2022 and 2023 cycles. However, the CBDT has introduced increased scrutiny of the base cost definition for cost-plus arrangements, particularly where employees are shared across entities or where infrastructure costs are allocated by formula rather than direct charge.
Bilateral APA Timelines
The FY2025 data confirms that bilateral APAs are taking 24 to 30 months from filing to conclusion — a timeline that has not materially improved from the FY2023 and FY2024 data, despite increased CBDT staff allocation. The primary bottleneck remains the Competent Authority negotiation phase between the CBDT and its treaty partner Competent Authorities. Taxpayers seeking bilateral certainty must plan for this timeline and file at the earliest opportunity. Filing a bilateral APA application immediately after the filing of an Indian income tax return for a year in which the related party transactions are first undertaken is the optimal timing strategy.
Unilateral APAs are concluding in 12 to 18 months from filing, which represents a modest improvement. For transactions with entities in non-treaty jurisdictions — or where the bilateral APA timeline is prohibitive — unilateral APAs remain a viable certainty mechanism, though they carry the risk of corresponding adjustment disputes in the foreign jurisdiction if the Indian pricing approach is not mirrored.
Transfer Pricing Audit Trends
Outside the APA programme, the CBDT's Transfer Pricing officers have issued notices in an increased number of cases involving outbound royalty payments, brand fee arrangements, and intra-group financing transactions. The characteristic concern in royalty and brand fee cases is whether the payment represents a genuine commercial arrangement at arm's length or an earnings-stripping mechanism. Taxpayers in these categories that have not secured APA certainty should ensure their transfer pricing documentation — the Master File, Local File, and Country-by-Country Report under Rules 10DA, 10DB, and 10DC — is complete and defensible before the audit notice arrives.
Action Items for Delhi NCR Multinationals
- Identify related party transactions with an annual value exceeding Rs 15 crore that do not have APA coverage and assess APA eligibility.
- For US, Japan, and UK bilateral transactions, consider bilateral APA filing given CBDT's treaty partner relationships with those jurisdictions.
- Engage transfer pricing counsel to benchmark your accepted methodology against the FY2025 accepted methodology trends and update the APA renewal strategy.
- Ensure Transfer Pricing documentation — Master File, Local File, CbCR — is filed by the due dates under Rules 10DA and 10DB, with complete benchmarking analysis for the FY2025 filings.
- Review outbound royalty and brand fee arrangements with dedicated transfer pricing documentation given the current audit focus.