Advance Pricing Agreement (APA) Advisory in India
An Advance Pricing Agreement (APA) is a binding arrangement between a taxpayer and India’s Central Board of Direct Taxes (CBDT) that pre-determines the Arm’s Length Price (ALP) or the transfer pricing methodology to be applied to specific international transactions. APAs are effective for up to five future years, with an option to roll back the agreement to the four preceding years providing up to nine years of transfer pricing certainty for multinational groups operating in India under Section 92CD of the Income Tax Act, 1961.
Types of Advance Pricing Agreements in India
The Indian APA programme operates across three agreement types, each suited to different transaction structures and jurisdictional profiles.
Unilateral APA
A Unilateral APA involves only the Indian taxpayer and the Indian tax authorities. It covers the pricing methodology for international transactions from an India-side perspective. Suitable for groups that require certainty only within the Indian jurisdiction and where the counterpart jurisdiction does not raise transfer pricing issues on the same transactions.
Bilateral APA
A Bilateral APA involves the Indian taxpayer, CBDT, and the tax authority of the counterpart jurisdiction. It eliminates the risk of double taxation by aligning the agreed pricing methodology across both countries. India currently has active bilateral programmes with Australia, Canada, Denmark, Japan, Singapore, the United Kingdom, and the United States.
Multilateral APA
A Multilateral APA extends the bilateral framework to three or more tax jurisdictions simultaneously. This structure is appropriate for multinational groups with complex intra-group supply chains or shared service arrangements spanning multiple countries.
| Factor | Unilateral | Bilateral | Multilateral |
| Parties involved | Taxpayer + CBDT | Taxpayer + CBDT + 1 foreign tax authority | Taxpayer + CBDT + 2+ foreign authorities |
| Eliminates double taxation | No (India side only) | Yes (both jurisdictions) | Yes (all jurisdictions) |
| Typical timeline | 24–36 months | 36–48 months | 48–60 months |
| Best suited for | India-only certainty needs | High-value bilateral transactions | Complex multi-country supply chains |
| Rollback available | Yes (4 preceding years) | Yes (4 preceding years) | Yes (4 preceding years) |
The APA Application Process in India
The APA programme is administered by CBDT’s Advance Pricing Agreement Team. The process follows a defined sequence, though timelines vary by agreement type and transaction complexity.
- Pre-filing consultation: The taxpayer initiates a preliminary meeting with CBDT to discuss the proposed APA, identify relevant international transactions, and assess the most appropriate pricing methodology. This step is optional but strongly recommended.
- Formal APA application: Filed using Form 3CED. The application must specify the nature of the international transactions, the proposed transfer pricing documentation, and the supported method, including financial data and functional analysis.
- Filing fee payment: Fees are payable under Rule 10H of the Income Tax Rules, 1962 based on the value of international transactions covered (see fee table below).
- CBDT review and negotiation: CBDT evaluates the application, may request additional information, and conducts detailed discussions on the proposed methodology. For bilateral APAs, this phase involves Mutual Agreement Procedure (MAP) negotiations with the treaty partner’s tax authority.
- APA signing: Once both parties agree on the pricing methodology and terms, the APA is executed as a legally binding agreement.
- Annual compliance reporting: For each year the APA remains in effect, the taxpayer must file an Annual Compliance Report (ACR) under Form 3CEF, documenting adherence to the agreed methodology.
APA Filing Fees in India (Rule 10H)
| Value of International Transactions in Application | Filing Fee |
| Up to ₹100 crore | ₹10 lakh |
| ₹100 crore to ₹200 crore | ₹15 lakh |
| More than ₹200 crore | ₹20 lakh |
Note: For unilateral APA applications in the IT sector, CBDT targets conclusion within a 2-year timeframe as part of the Government’s ease-of-doing-business initiatives (FY 2026).
APA Programme in India: Current Status
The Indian APA programme has expanded significantly in recent years, reflecting growing demand for transfer pricing certainty among multinational groups. CBDT signed a record 125 APAs in FY 2023-24 comprising 86 Unilateral APAs (UAPAs) and 39 Bilateral APAs (BAPAs) a 31% increase over the 95 APAs concluded in FY 2022-23 and the highest annual total since the programme’s inception.
Cumulatively, CBDT has entered into 641 APAs since the programme launched: 506 UAPAs and 135 BAPAs. The FY 2023-24 BAPA total was also the highest recorded in a single financial year. Bilateral agreements in that period covered India’s treaty relationships with Australia, Canada, Denmark, Japan, Singapore, the United Kingdom, and the United States.
How MBG Supports Your APA Engagement
MBG’s Transfer Pricing team advises multinational groups across the full APA lifecycle from pre-filing strategy and transaction scoping through CBDT negotiations, agreement execution, and annual compliance reporting. Our practitioners have managed both unilateral and bilateral APA engagements across technology, manufacturing, pharmaceuticals, and financial services.
We help clients determine the appropriate APA type and pricing methodology, prepare the Form 3CED application package, manage correspondence and negotiation with CBDT, and coordinate with foreign competent authorities for bilateral cases. For groups already in dispute, we also evaluate whether a rollback APA can resolve prior-year positions under Section 92CD.
