The Finance Bill, 2026 proposes a targeted amendment to section 169 of the Income-tax Act, 2025 to rationalise the process of giving effect to Advance Pricing Agreements (APAs). Under the existing law, only the person who entered into an APA could file a modified return, leaving associated enterprises—whose income and tax liability may also change because of the APA—without a statutory mechanism to revise returns or claim refunds of excess taxes paid or withheld. The proposed amendment addresses this gap by expressly permitting both the APA signatory and any associated enterprise affected by the APA to file a return or modified return, strictly in accordance with and limited to the agreement. Such return must be filed within three months from the end of the month in which the APA is entered into. The amendment applies to APAs entered on or after 1 April 2026 and covers tax years beginning from 1 April 2026 onwards. The change aims to ensure symmetry, certainty, and timely tax adjustments across all affected entities.
Amendment of section 169 of the Income-tax Act, 2025 relating to providing effect to advance pricing agreements
The existing provisions of section 168(1) allow filing of a modified return of income only by the person who has entered into advance pricing agreement (APA) with the Board. The provisions do not allow for modifying the return of income or filing of return of income by the associated enterprise whose income and tax liability is correspondingly modified consequent to the APA. Hence, there is no provision in the existing law to enable such Associated Enterprise (who is not the person entering into an APA) for filing of return of income and claiming refund of any additional taxes paid by it or withheld from its income.
2. In order to rationalise the aforesaid provision, it is proposed to provide that where an income is modified as a result of advance pricing agreement entered into with any person then, such person shall, or any other person being an associated enterprise, may, furnish a return or a modified return, as the case may be, in accordance with and limited to the agreement; within a period of three months from the end of the month in which the said agreement was entered into, in respect of tax years covered by such agreement, where such agreement is entered on or after 1st April, 2026, in respect of tax year beginning from 1st April, 2026 and subsequent tax years.
3. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the tax year 2026-27 and subsequent tax years.
[Clause 45]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 45 of the Bill seeks to amend section 169 of the Income-tax Act, 2025 relating to effect to advance pricing agreement.
Sub-section (1) of the said section provides that if return for any tax year covered by an advance pricing agreement has been furnished by any person, before the date of entering into the said agreement, he shall, irrespective of anything to the contrary contained in section 263, furnish a modified return, in accordance with and limited to the agreement, in respect of such tax years, within three months from the end of the month in which the agreement was entered into.
It is proposed to substitute the said sub-section so as to provide that where an income is modified as a result of advance pricing agreement entered into with any person then, such person shall, or any other person being an associated enterprise, may, furnish a return or a modified return, as the case may be, in accordance with and limited to the agreement; within a period of three months from the end of the month in which the said agreement was entered into, in respect of tax years covered by such agreement.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
45. Amendment of section 169.
In section 169 of the Income-tax Act, for sub-section (1), the following sub-section shall be substituted, namely:––
“(1) Irrespective of anything to the contrary contained in section 263, where an income is modified as a result of advance pricing agreement entered into with any person then, such person shall, or any other person being an associated enterprise may,–
(a) furnish a return or a modified return in accordance with and limited to the agreement; and
(b) the time period for furnishing such return or modified return shall be three months from the end of the month in which the agreement was entered into, where the tax years relevant for such return or modified return shall be the years covered by such agreement.”.
