Chapter X - Special Provisions Relating to Avoidance of Tax
Section 169
Section 169: giving effect to an advance pricing agreement
Section 169 deals with the practical follow-through once a taxpayer has entered into an Advance Pricing Agreement (APA) under Section 168 - it lets them (or an associated enterprise) file a modified return reflecting the agreed pricing, for the tax years the agreement covers.
On this page
Need advice on Section 169?
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
(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.
(2) Except as provided in this section, all other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 263.
(3) Where a modified return is furnished under sub-section (1), and assessment or reassessment proceedings, in respect of a tax year to which the agreement applies, were initiated before the filing of such return then— (a) if such proceedings have been completed before the filing of such return, the Assessing Officer shall pass an order modifying the total income of the relevant tax year; or (b) if such proceedings are pending on the date of filing of modified return, the Assessing Officer shall proceed to complete them, as per the agreement after taking into consideration the modified return so furnished.
(4) Irrespective of anything contained in section 275 or 286 or 296— (a) the order in respect of a case falling under sub-section (3)(a) shall be passed within one year from the end of the financial year in which the modified return under sub-section (1) is furnished; (b) in respect of a case falling under sub-section (3)(b), the period of limitation as provided in section 275 or 286 or section 296 for completion of pending assessment or reassessment proceedings shall be extended by twelve months.
(5) For the purposes of this section— (a) “agreement” means an agreement referred to in section 168(1); (b) the assessment or reassessment proceedings for a tax year shall be deemed to have been completed where— (i) an assessment or reassessment order has been passed; or (ii) no notice has been issued under section 270(8) till the expiry of the limitation period provided under the said section.
Introduction
Section 169 gives effect to an advance pricing agreement through an agreed return or modified return. The Finance Act, 2026 permits the taxpayer to furnish it and an associated enterprise to do so, with a three-month deadline from the end of the agreement month.
Key takeaways
Give effect to APA
Where an advance pricing agreement modifies income, the covered person must, and an associated enterprise may, furnish a return or modified return limited to the agreement.
Amended deadline
Under the Finance Act, 2026 wording, that return is due within three months from the end of the month when the agreement was entered into for the relevant covered years.
What the section allows
Irrespective of the normal return-filing framework in Section 263, where income is modified as a result of an APA, the person who entered into it shall, and another associated enterprise may, furnish a return or modified return limited to the agreement within three months from the end of the month in which it was entered into, for the tax years covered by it.
This applies irrespective of whether or not any assessment, reassessment or recomputation proceeding for the relevant tax year is pending - the modified return can be filed to give effect to the APA regardless of where the normal assessment process stands.
Why this matters
An APA typically covers multiple future years (and can cover past years via "rollback"). Without a mechanism like this, a taxpayer who already filed returns for those years based on their own transfer pricing analysis would have no clean way to update those filings to match the agreed price once the APA is signed. Section 169 provides that mechanism.
Track assessment status separately
If assessment or reassessment was already initiated for a covered year, the Assessing Officer follows the statutory path for a completed versus pending proceeding after the modified return is filed.
Step-by-step flow for applying Section 169
- 1
Has income been modified as a result of an advance pricing agreement under Section 168(1)?
- No: Section 169 does not apply.
- Yes: The person who entered into the agreement shall, and any other person being an associated enterprise may, furnish a return or a modified return limited to the agreement.
- 2
File within the time limit
Three months from the end of the month in which the agreement was entered into, for the tax years covered by the agreement.
- 3
Had assessment or reassessment for that year been initiated before filing?
- No: The modified return is dealt with as a return under Section 263.
- Yes: Go to the next step.
- 4
Was the proceeding completed or pending when the modified return was filed?
- Completed: The Assessing Officer passes an order modifying total income within one year from the end of the financial year in which the modified return is furnished.
- Pending: The Assessing Officer completes it as per the agreement, and the limitation period is extended by twelve months.
Practical checklist
Do
- Record the agreement date, covered years and three-month filing deadline.
- Reconcile each modified return strictly to the agreement and identify pending or completed assessments.
Avoid
- Do not use the pre-2026 subsection (1) wording that excluded an associated enterprise from the option.
- Do not modify unrelated return items beyond the agreement's scope.
Illustrative example
Worked example: modified returns after an agreement
Hypothetical facts (illustration only, not a real taxpayer): A company enters into an advance pricing agreement on 10 August 2027 (assumed date). The agreement covers three tax years, A, B and C. Assessment for Year A was already completed; assessment for Year B was pending; Year C had not been taken up.
Time limit to file
The month of the agreement ends on 31 August 2027, so modified returns must be furnished within three months, by 30 November 2027.
Year A (completed)
The modified return is furnished in the financial year ending 31 March 2028. The Assessing Officer must pass the modifying order within one year from that date, by 31 March 2029.
Year B (pending)
The Assessing Officer completes the assessment as per the agreement, considering the modified return. The normal limitation under Section 275, 286 or 296 is extended by twelve months.
Year C
No proceedings had been initiated, so the modified return is treated like a return under Section 263, as Section 169(2) provides.
Outcome
- The modified return must be limited to the agreement; it is not a route to revise unrelated items.
- Whether a proceeding is "completed" follows Section 169(5)(b): an order has been passed, or no Section 270(8) notice was issued within its limitation period.
Glossary
- Advance pricing agreement
- An agreement under Section 168 determining a transfer price or specified attributable income.
- Modified return
- A return adjusted within the agreement's scope under Section 169.
Frequently asked questions
Who can file the modified return under Section 169?
The person who entered into the APA shall furnish the return or modified return; another associated enterprise may do so. The return must be limited to the agreement and the years it covers.
Does a pending assessment stop me from filing a modified return under this section?
No - Section 169 applies irrespective of whether an assessment, reassessment or recomputation proceeding for the relevant tax year is pending.
Is filing the modified return automatic once an APA is signed?
No - it must be furnished within the prescribed period, in the prescribed form and manner; it doesn't happen automatically just because the APA exists.
Need help applying this provision to your situation?
Get help with your Advance Pricing Agreement filingLast updated 10 October 2026