Master File, Local File and CbCR: What an Indian Subsidiary Must Actually Prepare

Indian transfer pricing compliance follows the OECD's three-tier documentation approach: a Local File with detailed evidence supporting the pricing of Indian related-party transactions, a Master File giving a high-level picture of the group's global business and TP policies, and a Country-by-Country Report showing revenue, profit, and tax by jurisdiction. These are different documents with different purposes - one filing does not satisfy the others. An Indian subsidiary might need only a simple Form 3CEB, or it might face the full package including Form 3CEAA and CbCR notifications, depending on transaction values, group revenue, and its role in the multinational group.

The Quick Comparison

Thresholds must be checked against the relevant year, group accounts, and notified exchange-rate rules - a group can be below the threshold one year and above it the next.

Local File: The Transaction-Level Defence File

The Local File is not a single form uploaded with the return - it is the underlying documentation maintained by the taxpayer and produced when the tax authorities ask for it. For an Indian subsidiary, it answers the questions an assessing officer will raise: what was bought, sold, or provided; which associated enterprise was involved; why the price or margin was arm's length; which method was selected; and what comparable data supports the conclusion. A Local File typically contains:

• Group and Indian entity overview, ownership structure, and associated enterprise list
• Functional, asset, and risk analysis
• Details of each controlled transaction and copies of intercompany agreements
• Transfer pricing method selection and comparable search/benchmarking analysis
• Segmental financial statements and reconciliations to the books

A company that obtains a Form 3CEB certificate but has no supporting Local File has not completed transfer pricing compliance - it has only filed the form. If Form 3CEB reports that management services were tested under a particular method, the Local File must show the agreement, charge mechanism, benefit analysis, cost base, mark-up, and benchmarking behind that conclusion.

Master File: When Form 3CEAA Applies

The Master File gives tax authorities a group-wide view - where the group creates value, owns intangibles, is financed, and allocates functions and risks across jurisdictions. Form 3CEAA is the prescribed Indian form:

• Part A applies where an Indian constituent entity's aggregate international transactions exceed Rs 50 crore
• Part B, the detailed Master File content, is generally required where consolidated group revenue exceeds Rs 500 crore and either aggregate international transactions exceed Rs 50 crore, or the value of intangible-property transactions exceeds Rs 10 crore

Do not rely only on the Indian subsidiary's own turnover - the Rs 500 crore test is based on consolidated group revenue. A complete Master File covers the group's legal and ownership structure, business description and value drivers, principal markets, important intangibles, intercompany financing, consolidated financial and tax position, and overall TP policies. It may be prepared centrally by the overseas parent, but only if the Indian entity obtains the information in a usable form and files the Indian prescribed particulars correctly - a group PDF built for another country's requirements may not map cleanly to Form 3CEAA. Where multiple Indian constituent entities exist, one designated entity may file on behalf of the group, subject to formal notification.

Form 3CEAA is generally due on or before the transfer pricing return deadline, typically November 30. Do not wait until November to request the file from headquarters - group-level data often needs sign-off across legal, tax, finance, and treasury teams in several countries.

CbCR: Who Actually Needs It

Country-by-Country Reporting targets very large multinational groups - it is not a routine filing for every foreign-owned Indian company. The threshold is consolidated group revenue above Rs 5,500 crore in the preceding accounting year. CbCR becomes relevant where:

• The ultimate parent entity is resident in India
• An Indian entity is designated as an alternate reporting entity
• The ultimate parent is outside India and CbCR is not exchangeable under the applicable framework
• An Indian constituent entity has a local filing obligation because statutory conditions are met

Form 3CEAC is the notification form identifying the reporting entity and its tax residence. Form 3CEAD is the actual report, generally covering revenue from related and unrelated parties, profit or loss before tax, tax paid and accrued, stated capital, employee count, tangible assets, and the names and activities of constituent entities. Form 3CEAC is typically due before the CbCR notification deadline, and Form 3CEAD within 12 months from the end of the reporting accounting year. A foreign parent filing CbCR in its home jurisdiction does not automatically end the Indian compliance review - local filing rules can still apply in surrogate-parent or exchange-of-information gap situations.

Which Companies Need Which Documents

A Practical Annual Workflow

Build a group compliance calendar. In the first quarter after year-end, obtain the final intercompany trial balance, agreements, and foreign-entity confirmations. By mid-year, complete benchmarking and Local File work. Get the Master File and CbCR status from group headquarters early enough to identify Indian filing requirements, then finalise Form 3CEB, Form 3CEAA, and any Form 3CEAC/3CEAD filings before their deadlines. Maintain one transaction register showing each associated enterprise, transaction type, amount, agreement, withholding tax position, GST treatment, TP method, and supporting document location - this reduces both filing risk and assessment risk.