Section 92B of the Income-tax Act: Meaning of International Transaction
An international transaction is a transaction involving associated enterprises where at least one associated enterprise is a non-resident and the transaction falls within the statutory scope of transfer pricing law. Section 92B of the Income-tax Act, 1961 sets out the definition; section 163 of the Income-tax Act, 2025 is its corresponding provision for the new regime.
1. Meaning of international transaction under section 92B(1)
Section 92B(1) covers transactions between two or more associated enterprises, either or both of whom are non-residents, involving tangible or intangible property, services, loans, borrowing or other dealings affecting profits, income, losses or assets. It also includes agreements to allocate or contribute to costs of benefits, services or facilities among associated enterprises.
Associated enterprise: Section 92A defines enterprises connected by management, control or capital participation and sets out specified tests. Arm's length price: the price that would apply between unrelated persons in uncontrolled conditions, determined under the relevant transfer pricing provisions.
2. Deemed international transactions under section 92B(2)
A transaction with an independent third party may still be deemed an international transaction where the third party has a prior agreement with an associated enterprise concerning that transaction, or the terms are determined in substance between the third party and the associated enterprise. The statutory non-resident condition must also be met.
Example: An Indian subsidiary buys materials from an independent supplier, but its overseas associated enterprise negotiates and determines the substantive supply terms with that supplier. The transaction may be covered even though the invoice is issued by the independent supplier.
3. Transactions expressly included in the Explanation
| Category | Illustrative coverage |
|---|---|
| Tangible property | Purchase, sale, transfer, lease or use of buildings, vehicles, machinery, equipment, commodities and other goods. |
| Intangible property | Rights in patents, trademarks, copyrights, licences, franchises, brands, know-how, customer lists and similar commercial rights. |
| Capital financing | Long- and short-term loans, guarantees, securities, advances, deferred payments, receivables and business debts. |
| Services | Management, marketing, market research, technical, design, consulting, agency, legal, accounting and research services. |
| Business restructuring | Restructuring or reorganisation between associated enterprises, whether or not the immediate or future effect on profits, income, losses or assets is apparent. |
| Cost contribution | Sharing or allocation of costs for group benefits, facilities or services. |
4. Meaning of intangible property
The Explanation to section 92B lists a broad range of intangible property. The categories below preserve the scope of the original statutory material:
- Marketing: trademarks, trade names, brand names and logos.
- Technology: process patents, patent applications, laboratory notebooks, technical documentation and know-how.
- Artistic: literary and musical works, copyrights, maps and engravings.
- Data processing: proprietary software, software copyrights, automated databases and integrated circuit masks and masters.
- Engineering: industrial designs, product patents, trade secrets, drawings, schematics, blueprints and proprietary documents.
- Customer: customer lists, contracts, relationships and open purchase orders.
- Contracts: favourable supplier contracts, licences, franchises and non-compete agreements.
- Human capital: trained and organised workforce, employment agreements and union contracts.
- Location: leasehold interests, mineral rights, easements, air rights and water rights.
- Goodwill: institutional, professional, personal and celebrity goodwill and going-concern value.
- Other information assets: methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists and technical data, together with similar items deriving value from intellectual content rather than physical attributes.
5. Income-tax Act, 2025: section 163
Section 163 reorganises the meaning of an international transaction in the Income-tax Act, 2025. Sub-section (1) lists the principal types of covered transactions; sub-section (2) addresses deemed international transactions involving an independent person; and sub-section (3) sets out the categories of intangible property. The official section correspondence maps former section 92B to section 163.
6. Transfer pricing implications and compliance
Where a transaction is covered, the applicable arm's length pricing provisions may require benchmarking, contemporaneous supporting records and an accountant's report, subject to the law and rules for the relevant tax year. Relevant provisions in the 1961 Act include sections 92, 92C, 92D and 92E; their corresponding 2025 Act provisions should be consulted for later years.
A cross-border payment is not automatically an international transaction merely because the counterparty is overseas. The associated enterprise relationship, deemed transaction conditions and statutory transaction scope must be examined.
7. Practical examples
Royalty: An Indian company pays its overseas parent for the use of a trademark. This can be an international transaction involving intangible property.
Intercompany loan: An overseas associated enterprise lends money to an Indian subsidiary. The financing terms may require arm's length analysis.
Unrelated exporter: An Indian business sells goods to an independent foreign customer without an associated enterprise or deemed transaction arrangement. The sale is not covered merely because it is an export.
8. Legislative history
The Finance Act, 2012 inserted the clarificatory Explanation to section 92B with retrospective effect from 1 April 2002. The Finance (No. 2) Act, 2014 amended subsection (2), effective 1 April 2015. Historical transactions must be assessed under the applicable version of the law.
9. Official legislation and guidance
- Income Tax Department: section 92B of the Income-tax Act, 1961
- Income Tax Department: transfer pricing guidance
- Income-tax Act, 1961, as amended by Finance Act, 2025 (official PDF)
- Official 1961-to-2025 section correspondence (navigator)
- Income Tax e-Filing Portal
Frequently asked questions
Does every transaction with a foreign customer fall under section 92B?
No. Ordinarily, the transaction must be between associated enterprises with the required non-resident connection, or satisfy the deemed international transaction rule.
Are guarantees and outstanding receivables covered?
Capital financing under the statutory Explanation includes guarantees, deferred payments and receivables. Whether a particular arrangement requires an adjustment depends on its facts and applicable law.
What is the corresponding provision in the Income-tax Act, 2025?
Section 163, titled Meaning of international transaction.