Guide to Income Tax Form No. 46: Meaning, Eligibility & Purpose

Form No. 46 is the prescribed form through which an assessee may exercise the option for determination of the Arm’s Length Price (ALP) for eligible international transactions or specified domestic transactions for multiple years in a single proceeding. This applies when you file for the first tax year under Section 166 of the Income Tax Act, 2025. This blog explains its purpose, eligibility, required details, filing process, and other important points in simple language to help you understand better. 

Income Tax Form No. 46: What Is It and Who May Use It?

Form No. 46 is a specific transfer pricing form under the Income Tax Act, 2025. An eligible assessee may use Form No. 46 to exercise the option under Section 166(9) to determine the ALP of an international transaction or a specified domestic transaction for the two tax years immediately following the first tax year.

Rule 82(5) requires the relevant transactions in the second and third tax years to be similar to those in the first tax year. Among other conditions, the ALP method must not change; the functions performed, taking into account assets employed and risks assumed, must remain materially consistent; and relevant business activities, financial, tax and accounting methods, classification of the assessee, and contractual terms must remain materially the same.

What is the Purpose?

The purpose of Form No. 46 is to enable an assessee to exercise the multi-year ALP option for eligible transactions in a single proceeding. In simple terms, if certain conditions are met, the option may allow the determination of ALP for similar eligible transactions in the second and third tax years in the same proceeding, subject to the prescribed conditions and the validity of the option:

• The transactions must be international or specific domestic ones. 
• The option can be used in the second and third tax years after the first. 
• A reference under Section 166 must have been made for the first tax year.
• The following transactions must meet the rules in Rule 82(5). 
• The assessee must also submit Form 47 along with Form 46. This way, the process can cover eligible similar transactions over multiple years in one go.

What Information May Be Requested Through Form No. 46? 

Form No. 46 requires information relevant to the exercise of the ALP option. This form consists of two parts: in part A, general information about the taxpayer is asked, while in part B, details relating to the option exercised under Section 166(9) are asked.

This form includes mainly the following:

• The relevant tax year and details of the subsequent tax years covered by the option
• Date on which the relevant ITRs and Form No. 48 are furnished
• Details relating to the transaction on which ALP is determined

Form No. 47, containing the accountant's certificate, must accompany Form No. 46. These details are used to furnish the information required for exercising the option under Section 166(9) and Rule 82.

How Does the Application Process Work? 

An assessee exercising the option must furnish Form No. 46 electronically through the Income Tax e-Filing portal. According to the Income Tax Department, the submission of the form manually is not permitted.

The steps involved in the procedure are:

• The assessee furnishes the required details in Form No. 46 for the relevant transactions and tax years.
• The taxpayer submits Form 46.
• The assessee furnishes Form No. 47, containing the accountant's certificate, along with Form No. 46.
• The TPO examines the prescribed conditions and passes a written order declaring whether the option exercised in Form No. 46 is valid or invalid.
• The TPO issues a written order determining whether the option is valid or not.
• The TPO is required to pass this order within one month from the end of the month in which the option is exercised.
• If the TPO declares the option invalid, the assessee may file an objection before the Commissioner to whom the TPO is subordinate within 15 days of receiving the TPO's order.

Form 47 is a mandatory document as it acts as a certificate by the accountant indicating that the transactions fulfil the requirements stated in Rule 82.

Understand the Role of Form 46 Under Income Tax

Form 46 has an important role in the transfer pricing regime. It helps an eligible assessee avail the option under Section 166(9) to use ALP for similar transactions over various tax years in a single proceeding.

However, filing Form 46 alone will not suffice to make the option valid. Taxpayers should meet certain conditions under Rule 82, and the TPO would decide whether the option is valid or invalid. Simply put, Form No. 46 enables an assessee to exercise the option for determining the ALP of similar eligible transactions for the second and third tax years in the same proceeding, subject to Rule 82.

Frequently Asked Questions

1. What Is the Due Date for Form 46 for Income Tax?

Form 46 may be submitted in the period from the end of the third tax year to 30 June of the next year following the third year. For example, where the first year is 2026-27, the second is 2027-28, and the third year is 2028-29, Form 46 may be filed by 30 June 2029.

2. What Does the TPO Check for Form No. 46? 

The TPO examines whether the relevant transactions satisfy the conditions prescribed under Rule 82(5), including consistency of the ALP method, functions performed, assets employed, risks assumed, relevant business and financial factors, and contractual terms.

3. Is Form No. 47 Required With Form No. 46? 

Yes. Form No. 46 has to be accompanied by Form No. 47, which is the accountants' certificate. Form 47 provides a statement that the relevant international transactions or specified domestic transactions satisfy the conditions provided for under Rule 82(5).

The option is also subject to prescribed compliance conditions, including requirements relating to accountant reports and income-tax returns, exclusion from Chapter XVI-B, and restrictions concerning associated enterprises resident in jurisdictions notified under Section 176.