The Central Board of Direct Taxes (CBDT) released its sixth annual report on the advance pricing agreement (APA) program, highlighting the following progress made in FY 2023-2024:
- A total of 125 APAs signed, being the highest number of APA signings in any single year since the commencement of the APA program
- 39 bilateral APAs signed as a result of entering into mutual agreements with India’s treaty partners—including Australia, Canada, Denmark, Japan, Singapore, the United Kingdom, and the United States—providing tax certainty totaling to 183 years, of which 18 bilateral APAs have rollback period of 52 years
- A total of 181 covered international transactions, with 156 transactions being benchmarked under the transactional net margin method (TNMM)
- More than half of bilateral APA applications with one treaty partner—the United States
- Average time taken to conclude bilateral APAs was approximately 65.61 months
- 86 unilateral APAs entered into—majority pertaining to IT industry, banking & insurance, engineering services, telecommunication, and power and energy—providing tax certainty for 420 APA years and 56 rollback years (17 APAs also had a rollback term)
- A total of 224 transactions benchmarked using five different methods, TNMM being the most widely used with 126 transactions
The report concludes by stating that “Though revenue mobilisation has never been the primary objective of the Indian APA programme, it is a positive externality flowing out from the programme that provides assured revenues to the Government of India. It is estimated that the 641 signed APAs have resulted in bringing finality in taxation to income of about Rs. 25,000 crores. This translates into a payment of tax of about Rs. 7,500 Crores.”