Recent Transfer Pricing Amendments – Expanding Applicability?

Introduction

Historically, the transfer pricing (‘TP’) regime under Indian tax law has been shaped as much by judicial interpretation as by legislation. Over the years, courts and tribunals played a pivotal role in narrowing the scope of TP applicability by insisting on substantive tests of ownership, control, and demonstrable profit impact. The Income-tax Act, 2025 (‘New Act’), however, marks a conscious departure from this approach.

Through a series of amendments, though portrayed as mere clarificatory, the legislature has sought to expand the applicability of TP provisions and bring within the TP net a wider range of cross-border arrangements that reflect economic dependence rather than legal form. These changes are particularly significant for multinational groups operating through contract manufacturing, captive service, and financing structures.