Section 92B, Income Tax Act 1961 vs Section 163, Income Tax Bill 2025

Transfer pricing rules in India stop group firms from moving profit across borders. They require that deals between associated enterprises (AEs) follow the arm’s length principle (ALP). That is how the law checks profit shifting and tax avoidance.

The meaning of “international transaction” sets how far these rules reach. Section 92B of the Income Tax Act, 1961 and Section 163 of the Income Tax Bill, 2025 both define it. The 2025 Bill sharpens the wording in places.

This note sets the two sections side by side.

1. Scope of the International Transaction Definition

Section 92B (1961 Act) and Section 163 (2025 Bill) both state what counts as an international transaction for transfer pricing. The term takes in cross-border deals between AEs. The aim is that those deals are priced fairly, so profit is not shifted and tax is not avoided.

Section 163 keeps the same reach and intent as Section 92B. It does rewrite a few definitions in plainer words. That makes filing easier.

2. Key Provisions and Comparisons

Definition of International Transaction

• Section 92B (1961 Act): an international transaction is a deal between two or more AEs, where either or both are non-residents.

• Section 163 (2025 Bill): the wording is tighter. At least one side must be a non-resident. That makes the reach of the rules clear.

Types of Transactions Covered

Both sections list the kinds of deal that count as an international transaction. That list is mostly the same in both.

1. Transactions Involving Tangible Property Both sections cover the purchase, sale, transfer, lease or use of tangible property. That takes in buildings, machinery, equipment, vehicles, commodities and other goods.

2. Transactions Involving Intangible Property Both sections cover intangible assets: patents, trademarks, copyrights, franchises, know-how, customer lists and commercial rights. Section 163 lists them in more detail, which helps.

3. Capital Financing Transactions Both sections cover lending and borrowing of money, short term and long term. They also cover guarantees, advances, deferred payments and the sale of securities.

4. Provision of Services Both sections cover services such as market research, marketing, administration, technical services, legal services and accounting.

5. Business Restructuring and Reorganization Both sections say a restructuring is covered even if profit does not change at once.

6. Cost Sharing Agreements Both sections cover cost-sharing deals, where AEs share the cost of services they use in common.

7. Other Transactions Affecting Profits, Income, Losses, or Assets Both sections carry a general clause. It takes in any deal that affects the profit, income, losses or assets of an AE.

3. Key Differences Between Section 92B and Section 163

1. Clarification on Non-Resident Involvement Section 92B says an international transaction must involve at least one AE that is a non-resident. Section 163 says it again, in plain words. So two Indian firms stay outside these rules unless a foreign link is direct.

2. More Detailed Definition of Intangible Assets Section 92B listed intangibles in broad terms: trademarks, patents and copyrights. Section 163 adds three groups. Human capital-related assets, such as a trained workforce and employment contracts. Location-related assets, such as mineral rights and leasehold interests. Contract-related assets, such as franchise and non-compete agreements.

3. Expanded Definition of Deemed International Transactions Both sections treat a deal with an unrelated party as an international transaction in two cases. One, an AE had an earlier agreement with that party. Two, an AE shaped the terms of the deal. Section 163 states this rule more plainly. It also catches indirect control by a foreign entity.

4. Improved Structure and Cross-Referencing Section 92B pointed to many other rules in the 1961 Act, which made it hard to read. Section 163 brings those rules into the new structure, so filing work is simpler.

4. Implications for Businesses

The move from Section 92B to Section 163 matters most to three groups: multinational groups (MNCs), Indian units of foreign firms, and firms with cross-border deals. For them, it means the following.

✅ No major change in filing. Deals covered under 92B stay covered under Section 163. ✅ Clearer definitions of intangible property. That helps in IP-heavy sectors such as tech, pharma and manufacturing. ✅ More explicit treatment of deemed international transactions, which blocks tax avoidance through indirect deals. ✅ Easier reading, because the 2025 Bill is better laid out and better linked.

5. Final Thoughts

The shift from Section 92B (1961 Act) to Section 163 (2025 Bill) brings no major change of substance. It makes the rules clearer and filing smoother. The sharper definitions of intangible property and of deemed international transactions help. A firm can see what tax is due more plainly.

For a firm that deals across borders, the rules are clearer and better laid out. They also sit closer to global transfer pricing norms.