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7 April 2021
CBDT relaxes Master File and Country by Country Reporting (CbCR) Rules

The Central Board of Direct Taxes (CBDT), vide notification on 5 April 2021, issued amendments to the Indian Income-tax Rules, 1962 (the Rules), namely Income-tax (9th Amendment) Rules, 2021. These amendments are applicable for Financial Year ending 31 March 2021 relevant to Assessment Year 2021-22.

We have captured these significant amendments made in Rule 10DA and Rule 10DB in the below table:
Rules Amendment - applicable on or after 1 April 2021
Rule 10DA(4) - Where there are more than one constituent entities resident in India of an international group, the Form No. 3CEAA may be furnished by any one constituent entity
  • Replaces the words "constituent entities resident in India of an international group" to "constituent entities of an international group required to file the information and document under sub-rule (2)."
Non-resident constituent entities in India, having taxable income in India and/or filing return of income are also required to comply with Indian transfer pricing regulations. The transfer pricing compliances also included the filing of Master File in Form No. 3CEAA, if specific thresholds are met.

Prior to this amendment, where an International group had multiple constituent entities, resident and non-resident constituent entities were required to file Form 3CEAA separately due to the words "constituent entities resident in India" in Rule 10DA(4). The multiple resident constituent entities could designate a single resident entity to file the Master file on behalf of all the resident designated entities. In the case of non-resident constituent entities, they were required to file the same individually, leading to an administrative compliance burden.

However, with this amendment, Form 3CEAA is now required to be filed by any one of the entities designated in Form 3CEAB for both resident and non-resident entities.

This change is also made in Appendix II, in Form No. 3CEAB, where the words "resident in India" are removed from the heading.
Rule 10DB(6) - For the purposes of sub-section (7) of section 286, the total consolidated group revenue of the international group shall be…
  • Replaces the term "five thousand five hundred crore rupees" to "six thousand four hundred crore rupees."
For CbCR related compliances to be applicable, the International group's consolidated group revenue shall have to exceed INR 64 billion (corresponding to approx. 750 million Euros, taking into consideration the current foreign exchange rates) as against erstwhile threshold of INR 55 billion. This would help align the CbCR filing threshold in India with global requirements.
Our Comments
This is a welcome move from the CBDT, as it will ease out the compliance-related processes in India and remove inconsistencies in global compliance requirements. This move is aligned with the Indian Government’s continuing efforts to promote ease of doing business in India.
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