The master file is a critical component of transfer pricing documentation, providing tax authorities with a high-level overview of a multinational enterprise's global operations. The Income Tax Act, 2025 establishes clear requirements for master file maintenance and filing.
The Statutory Framework
Rule 123
Rule 123 requires every person, being a constituent entity of an international group, to keep and maintain information and documents if:
- The consolidated group revenue exceeds ₹500 crore
- The aggregate value of international transactions during the accounting year exceeds ₹50 crore, or in respect of intangible property, exceeds ₹10 crore
Purpose
The master file provides a comprehensive picture of the multinational enterprise's global business, including its organisational structure, business operations, intangible property, financing arrangements, and transfer pricing policies.
The ₹500 Crore Threshold
Consolidated Group Revenue
The ₹500 crore threshold applies to the consolidated group revenue of the international group as reflected in the consolidated financial statement. This ensures that only significant multinational groups are subject to master file requirements.
International Transaction Thresholds
Even if the consolidated group revenue exceeds ₹500 crore, the master file requirements apply only if:
- The aggregate value of international transactions exceeds ₹50 crore; or
- The aggregate value of international transactions in respect of intangible property exceeds ₹10 crore
Master File Content
Organisational Structure
- List of all entities of the international group
- Chart depicting legal status and ownership structure
Business Description
- Nature of the business or businesses
- Important drivers of profits
- Supply chain for the five largest products or services
- Important service arrangements
- Major geographical markets
Intangible Property
- Overall strategy for development, ownership, and exploitation
- List of entities engaged in development and management
- List of important intangible property
- Important agreements related to intangible property
- Transfer pricing policies related to R&D and intangible property
Financing Arrangements
- Detailed description of financing arrangements
- List of top ten unrelated lenders
- Group entities that provide central financing functions
- Transfer pricing policies related to financing arrangements
Financial Information
- Copy of the annual consolidated financial statement
- List and brief description of existing unilateral advance pricing agreements and other tax rulings
Filing Requirements
Due Date
Form No. 56 must be furnished on or before the due date for furnishing the return of income as specified under Section 263(1)(c).
Designated Entity
Where there are more than one constituent entities required to file, Form No. 56 may be furnished by any one constituent entity if the international group has designated such entity and the information has been conveyed in Form No. 57.
Retention Period
The information and documents must be kept and maintained for a period of nine years from the end of the relevant tax year.
Expert Legal Guidance
Understanding master file requirements is essential for multinational enterprises. Anuj Desai & Associates provides expert advisory services on transfer pricing documentation, helping taxpayers maintain compliant master files.