Master File & CbCR Compliance

Country by Country Reporting is mandatory for the ultimate parent entity of an MNE group whose global consolidated turnover exceeds EUR 750 million or approximately INR 6,400 crore in the preceding accounting year. The CbCR is filed through Form 3CEAD and must be submitted by the prescribed deadline. Where the ultimate parent is resident in a jurisdiction without an activated exchange agreement with India, a surrogate parent entity may be designated to discharge the filing obligation.

Form 3CEAD requires jurisdiction-wise disclosure of the following data for every jurisdiction in which the MNE group operates revenue from transactions with related parties, revenue from transactions with unrelated parties, profit or loss before income tax, income tax paid on a cash basis, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash. This data must be consistent with the group's consolidated financial statements and reconcilable across all jurisdictions.

Where an MNE group has more than one Indian constituent entity, one entity may be designated to file the Master File on behalf of all other Indian constituent entities eliminating the need for multiple separate filings. The designated entity must formally notify the prescribed authority of this arrangement. The filing made by the designated entity must be complete, accurate, and consistent across all represented entities. The arrangement reduces administrative burden but does not reduce the compliance obligation of the underlying entities.

Automatic Exchange of Information is a framework under which tax authorities in signatory jurisdictions share CbCR data with each other without a specific request. India participates in AEOI under bilateral Competent Authority Arrangements and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This means CbCR data filed in India is transmitted to revenue authorities in every jurisdiction covered by the relevant exchange agreement. Inconsistencies between the CbCR and the group's actual profit allocation or tax positions are therefore visible to multiple authorities simultaneously making accuracy across all data points critical.

Non-filing of Form 3CEAA or Form 3CEAD, or furnishing inaccurate information in these forms, attracts a penalty under Section 271AA of the Income Tax Act. The penalty for failure to keep and maintain information and documents, or for furnishing incorrect information, is 2% of the value of the international transaction for each such failure. Additionally, non filing of Form 3CEB in connection with the underlying transactions attracts a separate penalty of INR 1,00,000 under Section 271BA. These penalties apply independently and are not mutually exclusive.

Yes. The Master File filed in India through Form 3CEAA must be consistent with the group's Master File prepared and filed in other jurisdictions. Revenue authorities increasingly cross reference Master File disclosures across jurisdictions particularly through AEOI mechanisms to identify inconsistencies in the group's described value chain, intangibles ownership, and profit allocation rationale. An Indian Master File that contradicts the group's position in another jurisdiction creates a dual exposure that is difficult to resolve at the assessment stage.

The prescribed filing deadline for both Form 3CEAA and Form 3CEAD is October 31 each year. Late filing attracts penalty exposure under Section 271AA and, in the case of CbCR, may trigger surrogate filing by the tax authority of a counterpart jurisdiction under the applicable exchange arrangement. There is no provision for condonation of delay based on data unavailability or group level coordination challenges. Data compilation and review must be completed well in advance of the deadline to avoid this exposure.