Budget 2026 Clarifies S.92CA: 60 Days Time Limit for TP Orders Codified [Read Finance Bill 2026]

The Union Budget for the Financial Year 2026-2027 presented by Finance Minister Nirmala Sitharaman has finally provided clarity on the calculation of the 60-day limit to issue orders under Section 92CA of the Income Tax Act, 1961, one of the most litigated procedural issues in transfer pricing audits. By inserting subsection (3AA) into Section 92CA, the legislature has codified a single, consistent methodology for calculating the sixty days, thus eliminating conflicting interpretations by the judiciary and resolving ongoing controversy after more than ten years.

Background

Section 92CA gives the TPO authority to establish the arm's length price for international and specified domestic transactions. Sub-section (3) requires that such order must be passed at least sixty days prior to the expiry of the limitation period for completion of assessment by the Assessing Officer.

However, the Act did not provide any direction regarding how to calculate these sixty days’ time limits. As a result of the legislative void, numerous judicial interpretations regarding the calculation of the sixty days’ time limit emerged, especially pertaining to whether the last day is included or excluded when determining the sixty days’ limit, handling of leap years, and handling of differing fiscal year ends.

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These different approaches taken by high courts throughout India created significant uncertainty for tax payers and made it easy to challenge TP orders on the basis of limitation. In several cases, TP orders were struck down as time-barred purely on computational interpretation, without adjudication on merits, an outcome that both taxpayers and the Revenue viewed as procedurally unsatisfactory.

Amendment of Section 92CA

In section 92CA of the Income Tax Act, 1961, after sub-section (3A), the following subsection shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 2007, namely:-

“(3AA). Notwithstanding anything contained in any judgment, order or decree of any court, for the purposes of making order under sub-section

(3), the calculation of sixty days shall be made and shall always be deemed to have been made in the following manner, namely:-

(a) where the period of limitation expires on 31st of March of any year (not being a leap year), the order under sub-section (3) may be made up to the 30th of January of that year;

(b) where the period of limitation expires on 31st of March of any year (being a leap year), the order under sub-section (3) may be made up to the 31st of January of that year;

(c) where the period of limitation expires on 31st of December of any year, the order under sub-section (3) may be made up to the 1st of November of that year.”

What Budget 2026 Changes

To address the issue, Budget 2026 inserted sub-section (3AA) in Section 92CA, with retrospective effect from 1 June 2007. The provision begins with a non-obstante clause, overriding any judgment, decree, or order of any court for the purpose of making an order under sub-section (3). The newly inserted provision deems the sixty-day period to have always been calculated in a specified manner, thereby standardising limitation computation across assessment years.

As of October 2023, the new provisions create an established method of establishing the computation of the sixty-day period; thus, creating uniformity in the determination of limitation for all assessment years.

How to Calculate the 60 Day Limitation Period

Pursuant to Amendment to the Act, the 60 day limitation is calculated as follows:

• When the limitation period expires on 31 March (non-leap year): The TP order may be passed no later than 30 January of the applicable year.

• When the limitation period expires on 31 March (leap year): The TP order can be passed no later than 31 January.

• When the limitation period expires on 31 December: The TP order can be passed no later than 1 November of the applicable year.

By having Parliament expressly state the dates for the above, the new provisions will remove the ambiguity of interpretation and, at the same time, provide consistency in applying the limitation process to the various legislation and the TP process.

Legislative Override of Judicial Pronouncements

Parliament's intent to nullify adverse judicial judgments is evident by its use of the words “notwithstanding anything contained in any judgment, order or decree of any court.” This can demonstrate how Parliament has enacted a curative amendment that validates administrative action retrospectively, thereby clarifying its legislative intent.

The ability to retrospectively validate administrative actions will greatly impact pending appeal cases with the only basis for challenging TP orders being limitation per se. Courts and tribunals are likely to be required to follow the deemed computation method for determining the timeliness of tax liability assessments, assuming there are no constitutionally based challenges.

Section 92CA(3AA) provides closure to a long-standing debate regarding the 60-day timeline for transfer pricing orders. By introducing precise, calendar-based deadlines that can retrospectively apply, Budget 2026 has provided greater uniformity, predictability, and administrative clarity to previously amorphous areas of transfer pricing.

This amendment does not simply represent a technical adjustment for tax professionals; rather, it alters the approach to future litigation and reinforces the transition from a procedural-based approach to one that relies on merits.

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