Section 92E of Income Tax Act: Meaning, Applicability, and Compliance

Section 92E of Income Tax Act mandates that every person engaged in an international transaction or a specified domestic transaction (SDT) during the previous financial year must obtain a transfer pricing audit report from a Chartered Accountant (CA) and submit it by the prescribed due date. This report is required to be furnished in Form 3CEB.

Section 92E requires taxpayers involved in transactions between associated enterprises to submit an audit report confirming that such transactions are conducted at arm’s length prices and comply with Indian tax regulations. This ensures transparency and prevents tax avoidance through mispricing.

• As per Section 92B (which supports the provisions of Section 92E), an international transaction is one that:

• Occurs between two or more enterprises where at least one enterprise is a non-resident of India
  

• Includes transactions such as sale, purchase, lease of tangible or intangible property
  

• Covers borrowing or lending money
  

• Encompasses provision of services
  

• Includes mutual agreements or arrangements among associated enterprises where terms like cost allocation are pre-determined

The Finance Act, 2012 expanded transfer pricing rules to include certain specified domestic transactions. These are transactions between related parties within India, such as:

• Transactions described under Section 80A, Section 80-IA(8), and Section 80-IA(10)
  

• Transactions under other sections of Chapter VI-A or Section 10AA subject to these provisions
  

• Business dealings between persons listed under Section 115BAB(4)
  

• Other prescribed transactions
  

If the aggregate value of such specified domestic transactions exceeds ₹20 Crores in the previous year, transfer pricing compliance under Section 92E is mandatory regardless of the value of individual transactions.

Enterprises are considered associated if they meet criteria such as:

• Common control or management, directly or indirectly
  

• One enterprise holding at least 26% voting power in another
  

• Loans representing at least 51% of the book value of assets
  

• Guarantees covering at least 10% of borrowings
  

• Appointment of more than half the board members by the same person(s)
  

• Business dependency on intellectual property or supply of raw materials exceeding 90%
  

• Ownership interest of at least 10% in another enterprise

• Section 92E applies to all taxpayers engaged in international or specified domestic transactions with associated enterprises
  

• The taxpayer must obtain a transfer pricing audit report from a CA and submit it in Form 3CEB by the due date
  

• The due date for filing Form 3CEB is generally November 30 following the end of the financial year (e.g., November 30, 2025, for AY 2025-26)
  

• Failure to comply attracts a penalty of ₹1,00,000 under Section 271BA
  

• Under Section 92(3), transactions resulting in increased losses or reduced income tax liability are exempt from Section 92E compliance
  

• The Finance Act, 2009 introduced safe harbour rules that provide relief by accepting declared transfer prices under certain conditions, applicable to some domestic transactions as well

Taxpayers must maintain detailed documentation including:

• 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 arm’s length price

• Transfer price adjustments