India's 2025-2026 Transfer Pricing Reforms: Tax Certainty, Prevention and Development in Emerging Economies
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Abstract
Transfer pricing remains one of the most contentious areas of international taxation, particularly in emerging economies where institutional capacity, information asymmetry and aggressive enforcement have historically generated high compliance costs and prolonged disputes. This article conducts a systematic literature review of India's 2025-2026 transfer pricing reforms, which represent a deliberate policy pivot from an enforcement-centric model toward a prevention-oriented framework anchored in expanded Safe Harbour rules and accelerated Advance Pricing Agreements (APAs). Drawing on signaling theory, information asymmetry and institutional perspectives, the study synthesizes evidence from 62 studies published between 2018 and 2026. The findings reveal that while the new Safe Harbour regime-featuring a consolidated 15.5 per cent margin for IT services, a higher eligibility threshold of INR 2,000 crore and multi-year certainty blocks, aligns with theoretical predictions that rule-based mechanisms reduce information asymmetry, the existing academic literature remains predominantly descriptive. Three critical research gaps are identified: the absence of rigorous empirical evaluation of the 2026 reforms impact on dispute volumes and compliance costs, limited understanding of taxpayer behavioural responses, especially among mid-sized enterprises, and a lack of comparative analysis with peer emerging economies. The paper contributes to the growing literature on tax certainty in developing countries by mapping these gaps and proposing a future research agenda that emphasises empirical work, behavioural studies and cross-jurisdictional learning. The reforms offer valuable lessons for other emerging markets seeking to balance revenue protection with investment facilitation in an era of heightened international tax scrutiny under the OECD/G20 BEPS framework and the Two-Pillar solution.
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