Transfer Pricing Certainty Gains Traction
India's tax administration has finalized a record 219 Advance Pricing Agreements (APAs) in fiscal year 2025-26. This surge marks a clear policy shift towards a certainty-driven tax system, seen by industry observers as a key structural reform. The total number of APAs now stands at 1,034, showing strong progress in preventing tax disputes, especially concerning transfer pricing. Businesses can now plan investments and cross-border transactions with a clearer understanding of their tax liabilities, reducing the need to set aside funds for uncertain outcomes.
Bilateral Pacts Bolster Global Alignment
A key development this fiscal year was the sharp increase in bilateral APAs (BAPAs), with 84 agreements reached. These pacts, negotiated with foreign tax authorities, are vital for multinational companies as they work to prevent double taxation across different countries. The expansion of India's BAPA network to 13 treaty partners, including new agreements with France, Ireland, Indonesia, and Sweden, highlights growing international confidence. India's strong position as a leading treaty partner for the United States in bilateral APAs further confirms the program's reach and reliability.
Safe Harbour Reforms Expand Reach
Alongside the APA framework, Safe Harbour reforms have been updated to offer a simpler, rules-based alternative. The Finance Act, 2026, combined technology service categories into a single 'Information Technology Services' segment with a set 15.5% margin. Importantly, the eligibility threshold rose from ₹300 crore to ₹2,000 crore, significantly widening the group of companies that can use this streamlined compliance route. These steps, along with automated approval, aim to reduce administrative discretion and friction.
These combined reforms are expected to benefit sectors like technology, pharmaceuticals, and financial services. By securing tax certainty for up to nine years, including rollback provisions, companies can effectively avoid retrospective tax demands. This predictable environment will boost India's attractiveness as a global investment destination, bringing it in line with international practices that favor advance certainty over lengthy disputes.