Indian Tax Administration issues 6th Annual Report on India’s advance pricing agreement (APA) program for the financial year 2023-24

India’s apex tax administration, the Central Board of Direct Taxes (CBDT) or the Indian Tax Administration, issued its 6th Annual Report on India’s advance pricing agreement (APA) program (the Annual Report or the Report). The annual report covers the financial year (FY) 2023-24. The report provides various statistical and qualitative aspects of India’s APA program since its inception in 2012, with a particular focus on activities during the FY 2023-24, with a view to encouraging discussion and debate among taxpayers, policy makers, media, economists, and similar interests on the strengths and weaknesses of the program. 

India launched the APA program in 2012 as a major initiative of the Indian government towards fostering a non-adversarial tax regime. The APA program allows the Indian Tax Administration to enter into APAs with taxpayers in respect of their international transaction for a maximum period of five years with the objective of determining the arm’s length price (ALP) or to specify the manner in which the ALP is to be determined. Post notification of the APA program, roll back provisions were introduced in March 2015. The roll back provision allows the taxpayer to roll back the agreement reached in the APA to earlier years, subject to a maximum of four years prior to the first year of the APA period. Accordingly, the Indian APA program allows the taxpayer to obtain certainty in matters of transfer pricing for a total period of nine years.

This annual report presents ample numerical data cataloguing the popularity and success of the APA program in India. FY 2023-24 has been one of resounding success for the APA program with several milestones in terms of the number of signings surpassed in unilateral as well as bilateral APAs. At the same time, the report also indicates the challenges faced and provides an assurance on the commitment of the CBDT to take steps to address these challenges. 

This alert captures the key information regarding the Indian APA program as may be discerned from the annual report.