india’s tax framework for cross-border business changed significantly in 2026. a new income tax act took effect on april 1. treaty renegotiations altered tax rates on cross-border payments. new reporting forms introduced stricter compliance requirements .
here are the key rules.
the new income tax act. what changed.
the income tax act, 2025 replaced the 1961 act from april 1, 2026 . the structure is reorganized. a single “tax year” replaces the old “previous year” and “assessment year” concepts . all section numbers changed. practitioners and businesses need to revalidate applicable rates and references .
key transfer pricing renumbering. core provisions under sections 92-92f of the old act now fall under sections 161-173 of the new act . form 3ceb became form 48. advance pricing agreement provisions moved to sections 168 and rules 103-120 .
double taxation avoidance agreements. claiming treaty benefits.
india has treaties with over 90 countries . these provide lower withholding rates on dividends, interest, royalties, and fees for technical services .
new documentation requirements. tax residency certificate (trc) is mandatory. new form 41 must now be filed even with a valid trc . additional disclosures required include contact details, indian address, and a formal declaration . form 10f must be filed electronically for all non-residents seeking treaty relief .
penalty for non-compliance. failure to submit form 10f on time can result in higher domestic withholding, denial of treaty benefits, delayed refunds, and increased scrutiny .
permanent establishment risk. expanded definitions.
the concept of permanent establishment determines whether business profits are taxable in india. treaty renegotiations expanded pe definitions.
the amendment to the india-brazil tax treaty (effective april 1, 2026) introduced broader definitions :
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service pe threshold of 183 days
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anti-fragmentation provisions
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broader dependent agent pe definition making it harder to avoid pe exposure through disaggregated structures
new pe risks in remote work. evolving interpretations expand tax nexus considerations. multinational groups must reassess global mobility and operational structures .
transfer pricing. documentation and compliance.
transfer pricing rules apply to international transactions between associated enterprises. the arm’s length principle remains unchanged. documentation obligations continue .
key compliance requirements.
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maintain contemporaneous transfer pricing documentation
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file accountant’s report (new form 48, previously form 3ceb) by the return filing due date
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master file and country-by-country reporting disclosures where applicable
penalties for non-compliance. failure to maintain documentation can attract a penalty of 2% of the transaction value . failure to furnish accountant’s report can attract a fixed penalty of ₹1 lakh .
advance pricing agreements. tax certainty.
apas determine the arm’s length price of cross-border transactions in advance for 5 years, extendable to 9 years . transactions covered under apa are not subject to transfer pricing audit .
new fast-track mechanism for it services. budget 2026 proposed a fast-track mechanism for unilateral apas in the it sector. the government aims to conclude such apas within two years .
safe harbour rules for it services. budget 2026 unified various it service categories into a single category with a common margin of 15.5%. turnover threshold increased from ₹300 crore to ₹2,000 crore .
new reporting forms for cross-border transactions.
from april 1, 2026, stricter reporting requirements apply to cross-border transactions .
form 145. for payments to non-residents. requires classification from 65 specific categories (software purchase, consulting fees, etc.) .
form 146. ca certificate required for foreign remittances exceeding ₹5 lakh in a year .
form 41. for claiming treaty benefits. mandatory even with valid trc .
foreign tax credit. tighter requirements.
indians earning income abroad or claiming foreign tax credit face tighter requirements . certification from a chartered accountant may be required for higher claims. reporting formats are more structured and standardized .
form 67 for foreign tax credit must be filed on or before the itr due date. there is no condonation for late filing .
gst update for cross-border services.
the finance act 2026 removed clause (b) of section 13(8) of the igst act . this reinstates the default recipient-location rule for determining the place of supply of intermediary services .
impact on exporters. indian businesses providing intermediary services to foreign clients can now qualify for export treatment. the place of supply shifts abroad. services can be supplied without charging output gst .
impact on importers. indian businesses procuring intermediary services from overseas suppliers now attract reverse charge gst. compliance obligations expand .
frequently asked questions.
1. what is the deadline for filing income tax return for a foreign company in india
july 31 for non-audited entities. september 30 or october 31 for companies subject to tax audit or transfer pricing audit .
2. what documents are needed to claim dt aa benefits
tax residency certificate (trc), form 41, and electronically filed form 10f. additional disclosures include contact details, indian address, and a formal declaration .
3. what is the penalty for not maintaining transfer pricing documentation
2% of the value of each specified domestic transaction. penalty applies for failure to maintain prescribed documentation, retain records for eight years, or report specified domestic transactions .
4. how does the new gst rule affect cross-border intermediary services
the place of supply now follows the recipient’s location. indian exporters can qualify for export treatment. indian importers of intermediary services must pay reverse charge gst .
5. what is an advance pricing agreement and how does it help
an apa determines cross-border transaction prices in advance for 5-9 years. provides tax certainty. transactions under apa are not subject to transfer pricing audit .
