BEPS Compliance for Indian Companies: 2026 Transfer Pricing & Pillar Two Guide

The global taxation landscape is undergoing its most radical transformation in decades, driven by the OECD/G20 Inclusive Framework on BEPS. For Indian Multinational Enterprises (MNEs) and foreign subsidiaries operating in India, the era of relying on disjointed national tax laws to optimize effective tax rates is over.

With the Income Tax Act, 2025 replacing the Income Tax Act, 1961 (effective from Tax Year 2026–27), and the Income-tax Rules, 2026 notified via G.S.R. 198(E) dated March 20, 2026, India’s entire transfer pricing compliance framework has been structurally renumbered and modernized. Every form number, section reference, and rule citation used in international taxation has changed.

While enterprise tax teams often rely on a generic BEPS compliance for Indian companies PDF or a high-level BEPS compliance for Indian companies PPT for board presentations, avoiding severe statutory penalties requires an exact understanding of the updated thresholds and the new form architecture.

Here is the definitive technical guide to India’s transfer pricing documentation structure and the immediate impact of the GloBE Information Return (GIR).

What is BEPS?

The OECD BEPS full form is Base Erosion and Profit Shifting. It refers to aggressive corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions (where the actual economic value is created) to lower-tax jurisdictions, thereby “eroding” the tax base of the former.

A Classic BEPS Example

An MNE transferring its valuable intellectual property (IP) to a shell subsidiary in a zero-tax haven, and then charging its Indian manufacturing unit massive “royalty fees” to artificially wipe out the Indian unit’s taxable profit.

India’s Response: The BEPS Action Plan

To combat this, the OECD and G20 created the 15-point BEPS Action Plan. India has been one of the most aggressive early adopters of this framework, formally implementing sweeping transfer pricing rules, the Equalisation Levy, and thin capitalization norms into domestic law.

What are the Transfer Pricing Compliance Requirements in India?

A primary outcome of Action 13 of the BEPS framework was the introduction of a standardized three-tier documentation structure. India originally codified this into domestic law under the Income Tax Act, 1961. With the transition to the Income Tax Act, 2025, the entire framework has been recodified under Sections 161 to 173 of the new Act, with corresponding new form numbers under the Income-tax Rules, 2026.

Important Transition Note: For FY 2025–26 (AY 2026–27), the old forms under the Income-tax Rules, 1962 (Forms 3CEB, 3CEAA, 3CEAB, 3CEAC, 3CEAD) continue to apply. The new forms under the 2026 Rules apply from Tax Year 2026–27 (AY 2027–28) onwards.

1. The Local File – Form 48 (Replacing Form 3CEB)

Applicability: Applies to any Indian taxpayer entering into international transactions or specified domestic transactions with Associated Enterprises (AEs).

Governing Law: Section 172 of the Income Tax Act, 2025 (formerly Section 92E of the 1961 Act). Prescribed under Rule 85 of the Income-tax Rules, 2026 (formerly Rule 10E).

Compliance: Requires a chartered accountant’s report (Form 48) validating that transactions were conducted at an Arm’s Length Price (ALP), backed by a comprehensive local Transfer Pricing (TP) study. Form 48 is a structured, transaction-by-transaction data submission comprising eleven clauses across six parts — a significant expansion from the older Form 3CEB.

Due Date: Must be furnished at least one month before the due date for filing the return of income.

2. The Master File – Form 56 (Replacing Form 3CEAA) & Form 57 (Replacing Form 3CEAB)

The Master File provides tax authorities with a high-level overview of the MNE’s global business operations, transfer pricing policies, and supply chain. This is where most Indian subsidiaries make compliance errors.

Governing Law: Section 171 of the Income Tax Act, 2025 (formerly Section 92D of the 1961 Act). Prescribed under Rule 123 of the Income-tax Rules, 2026 (formerly Rule 10DA).

Part A (No Threshold): Maintenance of Part A of Form 56 is mandatory for every constituent entity of an international group, regardless of revenue or transaction size.

Part B (Dual Threshold): Filing Part B of Form 56 is only mandatory if the group meets both of the following tests:

• The consolidated global group revenue exceeds INR 500 Crores in the accounting year, AND
• The aggregate value of international transactions exceeds INR 50 Crores (or INR 10 Crores specifically for the transfer or lease of intangible property).

Form 57 (Designation Intimation): If an international group has multiple constituent entities in India, they must designate one entity to file the Master File and notify the tax authorities using Form 57. This must be filed 30 days before the Form 56 due date – missing this window means each entity must file its own Master File.

3. Country-by-Country Reporting (CbCR) – Form 59 (Replacing Form 3CEAD) & Form 58 (Replacing Form 3CEAC)

Is the CbCR applicable in India? Yes, heavily. Governed by Section 511 of the Income Tax Act, 2025 (formerly Section 286 of the 1961 Act) and Rule 124 of the Income-tax Rules, 2026 (formerly Rule 10DB), it requires the MNE to report revenue, profit before tax, income tax paid, stated capital, and headcount for every single jurisdiction they operate in.

Threshold Criteria: CbCR applies to MNE groups with a consolidated global revenue exceeding INR 6,400 Crores in the preceding accounting year (updated from the older INR 5,500 Crore limit to align with the OECD’s €750 million standard).

Form 59: Filed by the ultimate parent entity or a designated alternate reporting entity.

Form 58 (Intimation): Where the parent entity is non-resident, the Indian constituent entity must notify the Director General of Income-tax (Risk Assessment) regarding which parent entity is filing the CbCR and its corresponding jurisdiction. Form 58 must be filed 2 months before the CbCR due date.

Form 60 (Replacing Form 3CEAE): When an MNE group nominates a Designated Constituent Entity (DCE) to file the CbCR on behalf of the group, this designation must be formally communicated to the Indian tax authority via Form 60.

Severe Penalties for Non-Compliance

India enforces strict financial penalties for failing to adhere to the three-tier documentation rules. The penalty amounts have been carried forward substantively into the new Act:

Master File Defaults

Failure to furnish the Master File (Form 56) by the due date attracts a flat penalty of INR 5,00,000. Additionally, failure to maintain or report required documentation for international transactions attracts a penalty of 2% of the value of each such transaction.

CbCR Defaults

Failure to furnish the CbCR (Form 59) triggers escalating daily penalties:

• INR 5,000 per day for the first month of default.
• INR 15,000 per day thereafter.
• INR 50,000 per day for continued failure following a penalty order.
• Providing inaccurate information in the CbCR attracts a distinct INR 5,00,000 penalty.

Quick Reference: Old vs. New Form & Section Mapping

Compliance	Old Form (1961 Act)	New Form (2025 Act)	Old Section	New Section	New Rule
Local File / TP Report	Form 3CEB	Form 48	Section 92E	Section 172	Rule 85
Master File	Form 3CEAA	Form 56	Section 92D	Section 171	Rule 123
Master File Designation	Form 3CEAB	Form 57	Section 92D	Section 171	Rule 123
CbCR Intimation	Form 3CEAC	Form 58	Section 286	Section 511	Rule 124
CbCR Report	Form 3CEAD	Form 59	Section 286	Section 511	Rule 124
CbCR DCE Intimation	Form 3CEAE	Form 60	Section 286	Section 511	Rule 124

Who is Eligible to be Subject to BEPS Pillar Two?

While Action 13 reshaped documentation, the OECD is currently enforcing its most ambitious project: BEPS Pillar Two (The Global Anti-Base Erosion or “GloBE” rules).

Pillar Two targets MNE groups generating a consolidated global turnover of €750 million or more in at least two of the four preceding financial years.

The Core Mechanism: 15% Global Minimum Tax

Pillar Two ensures that large MNEs pay a minimum effective tax rate (ETR) of 15% on profits in every jurisdiction where they operate. If an MNE’s effective tax rate in a specific country drops below 15%, a “Top-Up Tax” is triggered.

The 2026 Impact for India

For FY 2024–25, large in-scope MNEs are navigating their first GloBE Information Return (GIR) filing deadlines in 2026.

Indian-Headquartered MNEs: Because India’s baseline corporate tax rates sit above the 15% floor, direct top-up exposure on domestic profits is generally limited. While India has not yet formally enacted domestic legislation for the Global Anti-Base Erosion (GloBE) Rules or a Qualified Domestic Minimum Top-up Tax (QDMTT) as of 2026, the Ministry of Corporate Affairs (MCA) has amended AS-22 to introduce mandatory Pillar Two accounting disclosures and a deferred tax exception. Indian MNEs must proactively simulate their GloBE ETR now to prepare for imminent domestic legislation and global reporting obligations.

Foreign MNEs with Indian Subsidiaries: If an Indian subsidiary utilizes heavy profit-linked tax holidays or SEZ exemptions, its calculated GloBE ETR might artificially dip below 15%, exposing the parent company to top-up taxes collected overseas.

Strategic Action Plan for Enterprise Tax Leadership

To prepare a robust defense against BEPS assessments, Tax Directors and Transfer Pricing Heads must move beyond reading the official BEPS Action Plan PDF and execute the following localized framework:

Run a GloBE ETR Simulation

Do not assume your Indian statutory tax rate (25.17%) protects you from Pillar Two. You must recalculate your tax using Pillar Two’s specific deferred tax and permanent difference adjustments to find your true GloBE ETR.

Audit Your Supply Chain Substance

If you route intellectual property or centralize procurement in a low-tax jurisdiction strictly for tax advantages without demonstrating actual physical “substance” (headcount, local decision-making), you will face immediate disallowances during Indian TP audits.

Consolidate Form 56 & Form 59 Data

Ensure there are zero discrepancies between the global revenue reported in your Master File (Form 56), your CbCR (Form 59), and your local Indian tax returns. Data mismatches across jurisdictions are the primary trigger for transfer pricing scrutiny.

Update Your Internal Form Templates

If your tax team is still working with 3CEB, 3CEAA, or 3CEAD templates, update immediately to the new Form 48, Form 56, and Form 59 formats prescribed under the Income-tax Rules, 2026. The old forms only apply for FY 2025–26 and earlier.

Navigating the transition from the 1961 Act framework to the 2025 Act – while simultaneously preparing for Pillar Two – requires specialized architectural structuring. At Mundhra Consulting Services, we conduct comprehensive Pillar Two impact assessments, prepare audit-ready Master Files under the new Form 56 format, and formulate defensible Transfer Pricing studies for enterprise clients.

Frequently Asked Questions (FAQs)

Also Read: Transfer Pricing Documentation in India