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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Under the Income-tax Act, 2025 (applicable from the June 2027 session), an advance pricing agreement entered into under section 168 can remain valid for a period of:

An advance pricing agreement under section 168 is valid for the period specified in it, which cannot exceed five consecutive tax years. The statute sets this cap, so neither a three-year nor a ten-year limit nor an unlimited term is correct.

  1. ANot exceeding three consecutive tax years
  2. BNot exceeding five consecutive tax yearsCorrect
  3. CNot exceeding ten consecutive tax years
  4. DAn unlimited period until the law changes

Explanation

Section 168(4) states that the agreement is valid for such period, not exceeding five consecutive tax years, as is specified in the agreement. Three and ten years are not the statutory limits, and the agreement is not open-ended; it also ceases to bind on a change in law or facts having a bearing on it.

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