Meaning of International Transaction: Section 163 of Income-tax Act, 2025 and Legacy Section 92B
An international transaction is a transfer pricing concept covering specified dealings between associated enterprises where at least one associated enterprise is a non-resident. From 1 April 2026, the current provision is Section 163 of the Income-tax Act, 2025. Section 92B remains relevant to matters governed by the earlier Income-tax Act, 1961.
Section 163: Meaning of International Transaction under the Income-tax Act, 2025
Section 163 forms part of the transfer pricing provisions. In substance, an international transaction is a transaction between two or more associated enterprises, one of which is necessarily a non-resident. The provision expressly includes the following categories:
- Tangible property: purchase, sale, transfer, lease or use of buildings, vehicles, machinery, equipment, tools, plant, furniture, commodities or other tangible articles, products or things.
- Intangible property: purchase, sale, transfer, lease or use of intangible property, including rights connected with copyrights, patents, trademarks, licences, franchises, customer lists, marketing channels, brands, know-how and similar business or commercial rights.
- Capital financing: lending or borrowing, guarantees, purchase or sale of marketable securities, advances, deferred payments, receivables and other business debts.
- Services: services such as market research, market development, marketing management, administration, technical services, repairs, design, consultation, agency, scientific research, legal services and accounting services.
- Business restructuring or reorganisation: transactions with an associated enterprise, whether their effect on profits, income, losses or assets arises immediately or at a future date.
- Cost contribution arrangements: mutual agreements or arrangements between associated enterprises for allocation, apportionment or contribution to costs or expenses connected with a benefit, service or facility.
- Other transactions: any other transaction having a bearing on the profits, income, losses or assets of the associated enterprises.
Essential Conditions for an International Transaction
| Condition | What to check |
|---|---|
| Associated enterprises | Whether the parties satisfy the associated-enterprise test under Section 162 of the Income-tax Act, 2025. |
| Non-resident element | At least one of the associated enterprises must be a non-resident for Section 163(1). |
| Transaction | The dealing must fall within the inclusive statutory scope, such as property, financing, services, restructuring, cost sharing or another transaction affecting profits, income, losses or assets. |
| Transfer pricing consequence | Once the transaction falls within the transfer pricing regime, the connected provisions dealing with arm's length price, documentation, reporting and proceedings must be considered. |
Deemed International Transaction under Section 163(2)
A transaction with a person who is not itself an associated enterprise can still be deemed to be an international transaction. Broadly, this can happen where there is a prior agreement concerning the relevant transaction between that other person and an associated enterprise, or where the terms of the relevant transaction are determined in substance between that other person and the associated enterprise. The statutory non-resident condition must also be satisfied.
This provision is important where an independent third party is interposed in a transaction but the relevant arrangement or substantive terms are connected with an associated enterprise.
What Is Intangible Property?
Section 163 includes a detailed, inclusive description of intangible property. The categories cover marketing-related, technology-related, artistic, data-processing, engineering, customer-related, contract-related, human-capital, location-related and goodwill-related intangible assets. It also covers methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists, technical data and similar items deriving value from intellectual content rather than physical attributes.
Examples of intangible property
| Category | Examples |
|---|---|
| Marketing | Trademarks, trade names, brand names and logos. |
| Technology | Process patents, patent applications, technical documentation and technical know-how. |
| Data processing | Proprietary software, software copyrights, automated databases and integrated-circuit masks and masters. |
| Customer related | Customer lists, customer contracts, customer relationships and open purchase orders. |
| Contract related | Favourable supplier contracts, licence agreements, franchise agreements and non-compete agreements. |
| Human capital | Trained and organised workforce, employment agreements and union contracts. |
| Location related | Leasehold interests, mineral exploitation rights, easements, air rights and water rights. |
| Goodwill related | Institutional goodwill, professional practice goodwill, personal or celebrity goodwill and going-concern value. |
Legacy Section 92B of the Income-tax Act, 1961
Under Section 92B(1), an international transaction meant a transaction between two or more associated enterprises, either or both of whom were non-residents, involving purchase, sale or lease of tangible or intangible property, provision of services, lending or borrowing money, or another transaction having a bearing on profits, income, losses or assets. It also included cost allocation, apportionment and contribution arrangements connected with a benefit, service or facility.
Section 92B(2) contained the deemed international transaction rule for transactions with a person other than an associated enterprise where a prior agreement existed with the associated enterprise or the relevant terms were determined in substance with the associated enterprise, subject to the statutory non-resident requirement.
The Explanation to Section 92B expressly covered tangible property, intangible property, capital financing, services, business restructuring or reorganisation and a detailed list of intangible assets. Those concepts have substantially been reorganised and carried into Section 163 of the Income-tax Act, 2025.
Related Transfer Pricing Provisions
Section 163 should not normally be read in isolation. Depending on the transaction and tax year, relevant provisions include the meaning of associated enterprise, determination of arm's length price, reference to the Transfer Pricing Officer, documentation and reporting requirements, safe harbour rules and advance pricing agreements.
Practical compliance point
Before treating a transaction as reportable, identify the governing tax year, confirm the associated-enterprise relationship, classify the transaction under the applicable statutory category, determine the arm's length pricing requirements and check the current prescribed forms, rules and due dates.
Official Resources
For current verification, refer to the Income Tax Department, the official Transfer Pricing guidance, the archived official Section 92B text, and the Income Tax e-Filing portal.
Legal note: This article is a general statutory guide. For a transaction or proceeding, verify the enactment applicable to the relevant tax year, amendments, rules, notifications, circulars and judicial decisions.