Ministry of Finance issues notification determining the Arm’s Length Price for A.Y 2025-26 in case of International or Specified domestic transaction

The Ministry of Finance (MoF) through its Notification No. 157/2025 has prescribed the range for determination of Arm’s Length Price (ALP) for the Assessment Year 2025-26 in respect of International Transactions or Specified Domestic Transactions under Section 92C (2) of the Income Tax Act, 1961.

Accordingly, where the variation between the Arm’s Length Price determined under section 92C and the price at which the International Transaction or Specified Domestic Transaction has actually been undertaken (i.e actual price) does not exceed the limits specified below, the actual transaction price will be deemed to the Arm’s Length Price.

• one per cent of actual price in respect of wholesale trading; and
• three per cent of the actual price in all other cases.

Therefore, if the variation between the ALP and the actual transaction price falls within the above limits, the actual price shall be deemed to be the Arm’s Length Price for the A.Y. 2025-2026.

Term “wholesale trading” has been explained below:

wholesale trading means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:

1. purchase cost of finished goods is eighty per cent. or more of the total cost pertaining to such trading activities; and
2. average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading activities.

For regulatory updates and update-related services, drop a mail at inquiries@lexplosion.in.

Source: Ministry of Finance