Towards Greater Tax Certainty: Decoding India's APA and MAP Performance in FY 2025-26
The Advance Pricing Agreement (APA) programme has evolved into a key pillar of India’s transfer pricing (TP) framework, fostering a more transparent and predictable tax environment for multinational enterprises. A significant development during financial year (FY) 2025-26 was the enactment of the Income-tax Act, 2025, which replaced the six-decade-old Income-Tax Act, 1961, with a modern, simplified, and taxpayer-centric legislative framework. In line with this broader objective, several reforms were introduced within the APA regime to enhance operational efficiency, streamline procedures, promote consistency in APA administration, and strengthen certainty for taxpayers. These measures are expected to further improve compliance ease, reduce administrative complexity, and reinforce the APA programme’s role as an effective mechanism for dispute prevention and tax certainty.
With reforms coming in India’s APA Programme, the Central Board of Direct Taxes (CBDT) achieved a historic milestone in FY 2025-26, recording its highest-ever performance with 220 APAs signed during the year.
The release of the 8th Annual Report on the APA Programme for FY 2025-26 highlights the continued success of the programme, with a growing number of APAs signed, reflecting its increasing popularity and widespread acceptance among taxpayers. Further underscoring its success, the Organisation for Economic Co-operation and Development (OECD) recognized India’s APA Programme in 2025 as the third-fastest-growing APA programme globally.
Key highlights are summarized below
1,000+ Applications concluded
Marking a significant achievement, the APA programme surpassed the 1,000th application milestone, with 1,035 applications concluded out of the 2,277 applications filed over the last 14 years as of 31 March 2026. The APA programme has cumulatively brought certainty for over 5,500 years. The APAs signed in FY 2025-26 itself brought tax certainty for 1,332 years.
Status of Applications Filed
1,000+ Applications concluded
While the APA programme continues to expand, the sharp rise in Bilateral Advance Pricing Agreements (BAPAs) reflects an increasing preference for globally coordinated tax certainty, whereby India and the counterparty jurisdiction mutually agree in advance on the TP outcome. Of the 1,035 APAs concluded as of 31 March 2026, 284 are BAPAs, with the highest number executed with the United States, followed by the United Kingdom and Japan.
Sharp fall in the number of new Unilateral Advance Pricing Agreements applications for FY 2025-26
The volume of applications filed has decreased relatively to the prior year, largely on account of the following reasons:
- Maturity of the programme - A large number of multinational groups with recurring TP exposure have already entered into APAs over the past decade. As the programme has matured, the stock of taxpayers needing a first-time APA naturally shows a declining trend.
- Shift from new APAs to renewals - A substantial proportion of signed APAs now consist of renewal cases rather than first-time applications. In FY 2025-26, 86 of the 136 UAPAs signed were renewals, demonstrating that many taxpayers are extending existing agreements instead of filing fresh applications.
- Economic and business uncertainty - When future business models are uncertain, taxpayers typically postpone filing APA applications, because APAs work best when facts, circumstances and transactions are expected to remain stable for multiple years.
- Increasing attractiveness of India's Safe Harbour regime - Over the past few years, the Indian Government has progressively rationalized and expanded the Safe Harbour framework, making it a more practical and cost-effective alternative for taxpayers engaged in routine service arrangements. For many captive Information Technology (IT) and IT-enabled services (ITeS) service providers, the prescribed Safe Harbour margins provide upfront tax certainty without the time, cost, and administrative burden associated with negotiating and concluding an APA.
Dominance of service sector with TNMM being the most preferred method
The data indicates that the services sector continues to dominate the APA landscape, with most agreements involving captive entities engaged in software development and IT-enabled services. This trend is aligned with the Indian Government's long-term vision of positioning India as a global hub for outsourcing and technology services. The sustained participation of service-sector taxpayers in the APA programme underscores the importance of TP certainty in supporting foreign investment, enhancing ease of doing business, and fostering a stable tax environment for multinational enterprises operating in India.
The Transactional Net Margin Method (TNMM) continues to be the preferred method to conclude the determination of Arm’s Length Price (ALP) of the covered transactions.
Duration of processing
The average duration of processing of UAPA was reduced from 42.94 months to 40.8 months in FY 2025-26, wherein 31 UAPAs were processed within a period of 12 months. Further, there has been a noteworthy improvement in the overall processing time of BAPA, wherein the processing time has reduced from 50.18 months to 41.47 months in FY 2025-26, wherein 7 BAPAs out of 84 processed during the year were processed within a period of 12 months.
Expanded Transaction Coverage
During FY 2025-26, the scope of transactions covered under APAs extended well beyond these traditional areas to include receivables and payables with associated enterprises, payments for know-how, license fees and royalties, marketing support services, deemed international transactions, as well as transactions involving the purchase and sale of goods, highlighting the programme’s broadening reach across diverse transaction categories.
Mutual Agreement Procedure Resolution Momentum
India has cumulatively resolved 902 MAP cases during the six-year period from 2020-2025 wherein 80% of the dispute relate to TP matters. Also, the average time to resolve MAP cases was 64.86 months in 2016, which has now been reduced drastically to 39.78 months. Driven by India's expanding engagement with treaty partners and enhanced collaboration between competent authorities, the inventory of pending MAP cases has continued to decline, reflecting the tax administration's commitment to efficient and timely dispute resolution.
Conclusion
The recent reforms under the Income-Tax Act, 2025 and Income-tax Rules, 2026, coupled with the rationalized Safe Harbour framework, signal a broader shift towards offering taxpayers multiple pathways to advance tax certainty. The CBDT's clarification permitting APA applicants to transition to the new Safe Harbour regime for eligible future years through an appropriate critical assumption has ensured that APAs and Safe Harbours operate as complementary instruments rather than competing alternatives.
This development is particularly significant for taxpayers in the IT and IT-enabled services sectors, who can now secure certainty for historical and current years through APAs while retaining the flexibility to adopt simplified Safe Harbour provisions prospectively. Together, these measures provide Indian taxpayers with an unprecedented degree of choice, certainty, and administrative efficiency.
