For multinational enterprises evaluating India as an investment destination, tax certainty has historically been a key concern, particularly around transfer pricing, the pricing of transactions between group companies across borders. To address this, India introduced two major programmes in 2012 and 2013: the Advance Pricing Agreement (APA) programme and the Safe Harbour Rules. Together, these initiatives aim to provide companies certainty on transfer pricing in advance, reducing disputes and litigation.
India's APA programme, introduced under the Income-tax Act, 1961, allows taxpayers and the tax authority to agree in advance on the arm's length pricing or the methodology for certain international transactions for up to five years, with rollback provisions covering four prior years. This means a single APA can provide certainty for up to nine years.
The programme has expanded significantly over the past 14 years. As of March 31, 2026, India has signed 1,034 cumulative APAs, including a record 219 agreements in FY 2025–26, the highest ever in a single year. Of these, 84 were bilateral agreements signed with 13 treaty partners, including the United States, UK, Japan and Singapore. India now accounts for 29% of all bilateral APAs concluded by the United States, making it its largest treaty partner in this area. India also concluded its first multilateral APA in FY 2024–25, marking a major milestone.
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Alongside APAs, the Safe Harbour Rules provide a simpler route to certainty for companies engaged in routine international transactions. Administered by the Central Board of Direct Taxes, the Safe Harbour framework prescribes margin thresholds for specific sectors. Companies that meet these thresholds and opt into the regime have their transfer pricing accepted without detailed scrutiny.
Under the Finance Act 2026, the technology services segment has been streamlined into a single category called “Information Technology Services”, with a standardised safe harbour margin of 15.5%. The eligibility threshold has also been increased from Rs 300 crore to Rs 2,000 crore, allowing more companies, especially global capability centres and mid-sized multinational firms, to opt into the regime. Companies can now remain in the safe harbour for up to five years, providing longer-term certainty.
Together, the APA and Safe Harbour programmes significantly reduce transfer pricing disputes, compliance costs and litigation risks. For global investors, these programmes signal India's shift towards a more predictable, non-adversarial tax regime, making the country a more attractive destination for cross-border investment and global operations.
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