Chapter X - Special Provisions Relating to Avoidance of Tax
Section 164
Section 164: meaning of "specified domestic transaction"
Section 164 defines which purely domestic (non-international) transactions are still brought within the transfer pricing rules of Chapter X. It lists specific categories tied to Chapter VIII deductions and certain other provisions, and - importantly - the whole definition only bites once the aggregate value of such transactions in a tax year crosses ₹20 crore.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
For the purposes of this Chapter, the expression “specified domestic transaction” in case of an assessee means any of the following transactions (not being an international transaction),— (a) any transaction referred to in section 122; (b) any transfer of goods or services referred to in section 140(9); (c) any business transacted between the assessee and other person as referred to in section 140(13); (d) any transaction, referred to in any other section under Chapter VIII, to which provisions of section 140(9) or (13) of this Act or section 80-IA(8) or (10) of the Income-tax Act, 1961 (43 of 1961) are applicable; (e) any business transacted between the persons referred to in section 205(4); (f) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in a tax year exceeds a sum of twenty crore rupees.
Introduction
A domestic transaction comes within the transfer-pricing regime only if it belongs to a listed category and the aggregate of such transactions in the tax year exceeds ₹20 crore. The Finance Act, 2026 amended the cross-reference in clause (d).
Key takeaways
Specified domestic transaction
The listed non-international domestic transactions fall within this transfer-pricing definition only when their aggregate value in the tax year exceeds ₹20 crore.
Listed categories
The provision references transactions under Sections 122 and 140, certain Chapter VIII dealings, Section 205(4) dealings and any prescribed transaction; the statutory cross-reference must be matched.
What counts as a specified domestic transaction
For the purposes of this Chapter, "specified domestic transaction", in the case of an assessee, means any of the following transactions (not being an international transaction):
- Any transaction referred to in section 122.
- Any transfer of goods or services referred to in section 140(9).
- Any business transacted between the assessee and another person as referred to in section 140(13).
- Any transaction referred to in any other section under Chapter VIII to which the provisions of section 140(9) or 140(13) of this Act, or section 80-IA(8) or (10) of the Income-tax Act, 1961, apply.
- Any business transacted between the persons referred to in section 205(4).
- Any other transaction as may be prescribed.
The ₹20 crore threshold
These transactions are treated as "specified domestic transactions" only where the aggregate of such transactions entered into by the assessee in a tax year exceeds a sum of ₹20 crore.
Aggregate, then test the threshold
Identify each listed domestic transaction, exclude international transactions, and total the qualifying transactions for the tax year. The ₹20 crore threshold applies to the aggregate, not each invoice separately.
Step-by-step flow for applying Section 164
- 1
Is the transaction an international transaction?
- Yes: It is outside this definition; examine it as an international transaction under Section 163.
- No: Go to the next step.
- 2
Does it fall in one of the listed categories?
The list covers transactions referred to in Section 122; transfers of goods or services referred to in Section 140(9); business transacted as referred to in Section 140(13); other Chapter VIII transactions to which Section 140(9) or (13) (or Section 80-IA(8) or (10) of the 1961 Act) applies; business between the persons referred to in Section 205(4); and any other prescribed transaction.
- No: Not a specified domestic transaction.
- Yes: Go to the next step.
- 3
Total all such listed transactions entered into in the tax year
The threshold is applied to the aggregate of the listed transactions, not to each transaction separately.
- 4
Does the aggregate exceed ₹20 crore?
- No: The transactions are not specified domestic transactions for that tax year.
- Yes: They are specified domestic transactions, and the arm's length provisions of Chapter X apply to them.
Practical checklist
Do
- Map each transaction to its exact clause and retain the underlying inter-unit or related-party records.
- Aggregate all qualifying domestic transactions for the tax year before deciding whether the threshold is crossed.
Avoid
- Do not include international transactions in this domestic definition.
- Do not use the pre-2026 clause (d) cross-reference that included Section 144.
Illustrative example
Worked example: testing the ₹20 crore aggregate
Hypothetical facts (illustration only, not a real taxpayer): In a tax year, a company has domestic transactions of ₹12 crore falling in clause (a) and ₹9 crore falling in clause (e) of Section 164. It also has ₹5 crore of transactions with a foreign associated enterprise that are international transactions.
Exclude international transactions
The ₹5 crore of international transactions are left out, because the definition covers only transactions that are not international transactions.
Aggregate the listed transactions
₹12 crore + ₹9 crore = ₹21 crore.
Apply the threshold
₹21 crore exceeds ₹20 crore, so the condition in Section 164 is met.
Contrast
If the clause (e) transactions had been ₹7 crore, the aggregate would be ₹19 crore. That does not exceed ₹20 crore, so none of the transactions would be specified domestic transactions for that year.
Outcome
- On the stated facts, the ₹21 crore of listed transactions are specified domestic transactions for the tax year.
- Keep a clause-wise register so that the aggregate can be reconciled to the books and to the accountant's report under Section 172.
Glossary
- Specified domestic transaction
- A listed non-international transaction whose aggregate for the tax year exceeds ₹20 crore.
- Aggregate threshold
- The total value test applied across the listed transaction categories.
Frequently asked questions
Is every related-party domestic transaction covered by transfer pricing rules?
No - only the categories listed in Section 164 (tied to specific Chapter VIII deduction provisions and section 205(4), plus any other prescribed transaction), and only if their aggregate value in the tax year exceeds ₹20 crore.
What is the monetary threshold for specified domestic transactions?
₹20 crore - the aggregate of the listed transactions entered into by the assessee in a tax year must exceed this amount for Chapter X's transfer pricing rules to apply to them.
Does this section cover cross-border transactions too?
No - the definition expressly excludes anything that is an "international transaction" (which is separately dealt with elsewhere in this Chapter).
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Talk to our team about specified domestic transaction complianceLast updated 9 October 2026