Section 92CA to Section 166: Transfer Pricing Framework Unchanged

Transfer pricing has long been one of the most closely watched compliance areas for multinational groups in India. As India builds itself into a hub for global manufacturing and services, dealings between related parties across borders have risen sharply. The Income-tax Act, 2025 now restates the country’s tax law. That includes the rules on when a case goes to the Transfer Pricing Officer (TPO).

At first glance, the move from Section 92CA of the Income-tax Act, 1961 to Section 166 of the new Act looks like a renumbering. It is more than that. Read against faceless cases, a single power to frame schemes, and a reworked tax office, the shift points to a deeper change in how India enforces its tax law.

This note sets out how the transfer pricing rules change under the new law, what stays the same, and why it matters for global groups that trade in or through India.

Understanding the Role of the Transfer Pricing Officer

The transfer pricing rules aim to set a price on dealings between related parties—a parent and its unit, say—at arm’s length (ALP). That is the price two unrelated parties would agree.

In India, if the Assessing Officer (AO) thinks a cross-border deal, or a specified domestic transaction, needs a closer look, the case goes to the Transfer Pricing Officer. The TPO studies the method, the comparables and the records, and decides whether the price meets the arm’s length test.

Section 92CA of the Income-tax Act, 1961 used to govern this step. Under the new Income-tax Act, 2025 the same job sits in Section 166. The frame is kept. The wording fits the new law, and the link between the two sections is set out in terms, so the core steps carry on.

In practice, transfer pricing audits will keep a central place in how India checks tax, even as the law around them changes.

Structural Continuity: Section 92CA and Section 166 Compared

Most sub-sections of Section 92CA are carried into Section 166, with a matching clause for each. For example:

• Section 92CA(1), which lets the AO send a transfer pricing case to the TPO, matches Section 166(1).

• Sub-section (3) of Section 92CA, on the TPO’s finding of an arm’s length price, matches Section 166(6).

• Section 92CA(4), which binds the AO to the TPO’s finding, matches Section 166(11).

A one-to-one mapping of this kind shows the aim is not to soften transfer pricing checks but to gather them up in the new law.

For global groups, the core duties stay the same: keep current records, apply OECD-aligned pricing methods, and defend your comparables.

The Bigger Shift: Section 532 and Scheme-Making Power

Section 166 keeps continuity. The real change is Section 532 of the Income-tax Act, 2025.

Under the old law, the Central Government ran a set of faceless schemes, one for each area: assessment, appeals, penalty, transfer pricing. Each scheme drew its legal backing from its own section.

Section 532 now gives one legal basis for schemes across the whole Act.

Section 532 lets a scheme serve two main aims:

• No direct contact between the taxpayer and the tax officer

• Better use of tax office resources through specialisation and economies of scale

That single centre changes how transfer pricing work is run in practice.

What Happened to “Team-Based Functioning” and “Dynamic Jurisdiction”?

Under the 1961 Act, faceless schemes were built to reach four aims:

1. No face-to-face contact

2. Better use of resources

3. Team-based working

4. Dynamic jurisdiction

Section 532 of the new Act keeps only the first two of these aims, and says so in terms.

Team-based working and dynamic jurisdiction are not among Section 532’s stated aims.

The omission is quiet, but it matters.

It points to a move away from layered, local decision-making, towards a tax office run from one centre, in fewer steps.

For a business, that cuts both ways:

• On the plus side, decisions may become more even and easier to call.

• On the minus side, there may be less room to weigh the facts of a single case.

Transition Rules for Faceless Transfer Pricing Schemes

The Income-tax Act, 2025 carries clear transition rules to keep cases on foot.

Section 536 says a scheme notified under the old Act keeps running under the matching clause of the new Act or under Section 532.

That is real comfort for a taxpayer in the middle of a transfer pricing audit.

It means:

• Old faceless transfer pricing steps stay valid

• Live cases continue without interruption

• There is no need to restart or re-file transfer pricing records

For legal certainty, that is a welcome outcome.

Practical Impact on Multinational Enterprises

Take a typical global structure.

A US technology firm runs a captive centre in India that develops software.

Each year the Indian unit books a cost-plus margin and files records to back its price.

If the AO doubts the margin or the comparables, the case goes to the TPO under Section 166.

Under the new Act, the steps look much the same.

What shifts is the way the case is run.

A scheme framed under Section 532 may now govern it.

This means:

• The case may run fully faceless

• The officer may sit anywhere in India

• All correspondence may run online

That fits a global shift towards digital tax work.

Alignment with Global Transfer Pricing Standards

India’s transfer pricing rules already sit close to the OECD guidelines on:

• Arm’s length principle

• Comparable uncontrolled price method

• Transactional net margin method

• Documentation requirements

The new Act leaves these principles largely as they are.

The change is in how the tax office works.

That fits India’s wider push to:

• Make it easier to do business

• Add transparency

• Cut disputes

For the OECD, changes of this kind raise tax certainty, which is a core aim of the BEPS project.

Litigation Strategy and Risk Management Under the New Framework

Transfer pricing has long been a big source of tax disputes in India.

Most turn on:

• Which comparables to use

• Profit margins

• Functional characterisation

A faceless, central set-up may change the course of disputes.

Two things follow.

Taxpayers may need to put more of their case in writing, not in oral argument.

The quality of the records will matter even more.

That puts a premium on:

• Sound transfer pricing policies

• A full functional analysis

• A consistent global pricing strategy

Why This Reform Matters Strategically

The move from Section 92CA to Section 166 is not just a technical one.

It mirrors wider tax policy aims:

• Digital tax administration

• Powers gathered in one centre

• Less risk of corruption

• A tax office that works better

These changes matter as India looks to draw global capital. Certainty on transfer pricing weighs in an investment decision. Global groups choose a place where the tax outcome can be relied on. The new framework is meant to deliver that.

Expert Perspective: What Businesses Should Do Now

A business in India can take four steps now:

• First, check that your transfer pricing records are sound and can be defended.

• Second, get ready for cases that run fully faceless.

• Third, keep your global transfer pricing policy and your Indian practice in line.

• Fourth, expect closer checks driven by data.

Note too that the new Act tightens transfer pricing checks rather than easing them.

The compliance burden remains heavy.

The Broader Evolution of India’s Tax System

The Income-tax Act, 2025 is the biggest rewrite of India’s tax law in decades. It does not remake the transfer pricing rules. It changes how they are run. A business keeps the legal ground it knows, and adapts to a new process. That is a sensible balance.

Conclusion: A New Administrative Era for Transfer Pricing

Moving from Section 92CA of the 1961 Act to Section 166 of the 2025 Act is a milestone in India’s tax history. The transfer pricing principles behind it are intact. The arm’s length test still governs cross-border dealings. What has changed is how the law is run.

Section 532 points to tax checks run from one centre, on screen, with no face-to-face contact. For a global group, that means one thing above all. Transfer pricing is no longer only a question of getting the economics right. Your records, your process and your strategy have to fit a tax office that is changing fast.

In the coming years, the groups that adjust first will reduce tax risk. They will also gain ground in one of the world’s fastest-growing markets.