Rule 10D: Local File Requirements Under India's TP Rules
Rule 10D defined: the rule prescribing what the contemporaneous local documentation must contain — and the blocks that make up the Local File in an Indian transfer pricing examination.
Definition
Rule 10D of the Income-tax Rules, 1962 is the rule that prescribes the content of the contemporaneous documentation an entity must maintain for its international (and specified domestic) transactions — the Local File, given effect by section 92D. Where section 92D says the documentation must exist and be maintained, Rule 10D says what it must contain, block by block.
The blocks:
| Block | What it must show |
|---|---|
| Business & management overview | Ownership, management, organisation, strategy |
| Industry & economic conditions | The industry, market, competition, supply chain |
| FAR profile | Functions, assets, risks of each enterprise in the transaction |
| Controlled transactions | Nature, terms, amount, counterparties |
| Uncontrolled transactions | The unrelated transactions relied on as comparables |
| Method selection | The method chosen and why it is the most appropriate |
| Assumptions & interpretations | The assumptions and legal interpretations relied on |
| Adjustment workings | The arithmetic behind any transfer pricing adjustment |
| Comparable identification | The search screens, the pool, the rationale per inclusion |
| Exclusion rationale | The documented reason for every comparable rejected |
| Arm’s length working | The computation of the arm’s length price and range |
| Supporting information | The other data, statistics and documents relied on |
| Annual update | The data refreshed each year; the prior-year comparables re-screened |
The emphasis in the rule is on the last three rows — the comparable identification, the exclusion rationale and the arm’s length working — because that is where a study is either a record or a narrative. The full checklist, item by item with practical notes, is in the Local File guide.
Why the rule is the examination’s outline
A Transfer Pricing Officer’s examination follows the Rule 10D blocks in order: the FAR (block 3) first, because it frames everything; the method (block 6) second, because it decides the comparison; the comparable blocks (9–11) third, because they decide the range. A file organised on the rule’s blocks is a file organised on the examination — which is most of what defensibility means in practice.
Example
An Indian services entity’s Rule 10D file: the FAR block documents a routine service provider from the service agreement and the organisation’s decision-making; the method block records the TNMM selection with the alternatives set aside; the comparable blocks carry the search criteria, the twelve dispositions with per-company reasons, the working-capital adjustment workings, and the IQR computation placing the adjusted OP/OC inside the range. The s.282BC notice arrives; the file — contemporaneous — is produced within 30 days.
See also
FAQ
Is Rule 10D documentation filed or maintained? Maintained — available and contemporaneous, produced on demand. The filed companion is the Form 3CEB accountant’s report; the two are prepared together but carry different legal fates (the Local File’s failure is the 2% penalty on the transaction value; the 3CEB’s is ₹1,00,000).
What is the single most-examined Rule 10D block? The exclusion rationale — the documented reason for every comparable rejected. A matrix without per-company reasons gives the TPO the right to substitute a pool and recompute the range, which is the fastest route from a documentation question to a pricing adjustment.
Run the screens as a study, not a spreadsheet
Quartyl applies the method, PLI and screening steps above as a pipeline — and keeps a documented reason for every exclusion.
Related docs
Rule 10D Documentation: The Complete Checklist
A Rule 10D documentation checklist for Indian transfer pricing — every item required, with practical tips for defending your Accept-Reject matrix before the TPO.
Read docContemporaneous Documentation: The 30-Day Rule in India
Contemporaneous documentation defined: transfer pricing documentation that exists before the return due date — and the 30-day production window that keeps the penalty off.
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