Notably, the draft rules significantly reduce delegated legislation, with the number of rules proposed to be cut to 333 from 511, and forms to 190 from 399, following consolidation and removal of redundancies.
Tax experts have flagged the proposed overhaul of transfer pricing reporting requirements as one of the most consequential changes in the CBDT’s draft Income-tax Rules and Forms. The revisions are being seen as a clear signal of a shift towards more targeted, risk-based scrutiny of cross-border related-party transactions.
A key change is the introduction of draft Form 48, which will replace the existing Form 3CEB as the accountant’s report for international related-party transactions and specified domestic transactions. While the form has been redesigned with drop-down selection fields and auto-population of certain information to ease filing, professionals said the compliance burden could rise due to expanded disclosures.
“The revised form introduces more disclosure requirements. These include detailed computation of the arm’s length price and any adjustments applied in the computation, the arm’s length range derived from comparable benchmarks, specific information on certain cost base elements, particularly costs incurred by associated enterprises and whether these have been included or excluded in the arm’s length price determination,” said Jitendra Jain, partner with Price Waterhouse & Co LLP.
According to Jain, the move appears as a “nudge” to taxpayers for completion and readiness of comprehensive transfer pricing documentation at the time of submitting the accountant’s report.
Apart from transfer pricing, the draft rules also propose a major revamp of perquisite valuation and compliance requirements.
Richa Sawhney, partner at Grant Thornton, said the proposed Rule 15 replaces the existing perquisite taxation framework under Rule 3 of the Income-tax Rules, 1962, and presents perquisites and valuation parameters in a tabulated format for easier reference. She added that thresholds have been updated in some cases, including the ₹200 per-meal limit for free food and the annual exemption for employer gifts, which has been increased to ₹15,000.
Sawhney said the revised rules also increase the taxable value of employer-provided cars by laying down higher standard monthly valuations. Further, no perquisite value will be assigned to employer loans not exceeding ₹2 lakh, compared with the earlier threshold of ₹20,000.
Another notable change relates to digital record-keeping. The draft requires prescribed professionals to maintain electronic books of account and other documents in a manner that ensures they remain accessible in India at all times. “The backup needs to be kept in India-based servers and needs to be updated on a daily basis. This requirement is in sync with similar requirements laid down for companies under the Companies Act, 2013, and related rules,” Sawhney added.
The rules also propose accountant-certified filing for claiming Foreign Tax Credit (FTC) to reduce incorrect claims, recognise the digital rupee for specified payments, and consolidate forms related to audit reports, statements and TDS certification. “These changes, along with the tech-savvy architecture of the forms, will help in simplifying and modernising compliance,” Sawhney said.
Sandeep Jhunjhunwala, partner at Nangia Global, said the draft reflects long-pending reforms, including updating perquisite thresholds that have remained outdated for years. “The rationalisation of archaic perquisite thresholds, such as tax-free at-work meal value and gifts received from employer, brings the income tax framework closer in line with contemporary economic realities,” he said.
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