Rule 10D and 10DA Deep Dive: Local File and Master File Requirements

The two rules that make up India’s TP documentation obligation — Rule 10D (the Local File) and Rule 10DA (the Master File) — are short in text and long in consequence. This guide walks each rule: the trigger, the content block by block, the preparation and production mechanics, and the non- compliance patterns the examination finds.

Rule 10D: the Local File

The trigger

Rule 10D(1) applies where the aggregate value of the person’s international transactions and specified domestic transactions in the financial year exceeds ₹300 million (₹30 crore). Below the threshold, there is no Rule 10D documentation obligation for the year (the pricing obligation under section 92(1) continues — the rule obliges the documentation, not the pricing, and the threshold is on the aggregate transaction value, not on the entities’ size).

The practical reading: the threshold check is a yearly computation on the aggregate of the covered transactions, and a group that crosses it in one year (a new transaction type, a growth year, an acquisition) has the documentation obligation from that year — the crossing year’s file is the first file, and it is the file with no prior-year pattern to lean on.

The content: the Rule 10D blocks

Rule 10D(1) prescribes the documentation’s content, and the blocks are the Local File’s skeleton:

Block	The content	The standard behind it
The person’s description	The business, the functions performed, the assets employed, the risks borne — the entity’s FAR	The functional analysis as the documentation’s foundation
The controlled transactions	The nature of the international and specified domestic transactions, the counterparties, the values	The transaction inventory — the scope of the documentation
The method and its rationale	The method(s) used for pricing, the reasons for the selection, the benchmarking approach	The best-method record — the method choice documented, not implied
The arm’s length computation	The computation of the arm’s length price: the PLI, the comparable set, the range, the tested party’s position, the adjustments	The benchmarking study — the matrix and the range in documentation form
The assumptions	The assumptions made in the pricing (the data used, the estimates, the periods)	The transparency of the analysis — the assumptions stated are the assumptions examinable
The related-party particulars	The associated persons, the relationship, the transaction values	The scope record — consistent with the return’s related-party disclosures
The financial information	The relevant financial data (the tested party’s accounts, the PLI inputs)	The data behind the PLI — the cost base, the revenue, the profit lines

The Local File is, in substance: the FAR, the transaction list, the method choice, the benchmark, and the computation — the study, written as the documentation. The content blocks are not a form to fill; they are the study’s exhibits, organized for the examiner.

The mechanics

Mechanic	The rule	The discipline
Preparation	Within 30 days of the financial year end — by 31 May	The study on the year’s actuals, completed and dated in the window — the contemporaneity that earns the penalty shield
Retention	8 years from the end of the financial year	The file and the working file behind it (the matrix, the evidence, the overrides) maintained for the full period
Production	On the notice under section 282BC, within the specified period (the standard 30-day window)	The production is a retrieval of the existing documentation — the response is the file, indexed, not a construction

The three mechanics are the penalty protection’s conditions in operational form: prepared in the window, produced on time, maintained for the period. The 271AA penalty (10% of the underpayment) is blocked where all three hold; any one failing, the penalty exposure is live.

Rule 10DA: the Master File

The trigger

Rule 10DA applies where the aggregate revenue of the MNE group in the immediately preceding financial year is ₹1,000 crore or more. The obligation is on the relevant entity — the group’s head office where it is in India; where the head office is outside India, the topmost Indian constituent entity of the group. (The threshold and the maintainer are the India specifics of the BEPS Action 13 master file — the OECD version runs on the €750 mn test and the ultimate/surrogate parent; see the Master File guide for the deltas.)

The content: the Rule 10DA blocks

Block	The content
The group’s business	The segmental breakdown — the business activities, the revenue and profit by segment — of the MNE group as a whole
The group’s structure	The organizational chart, the constituent entities by jurisdiction, the head office location
The group’s intangibles	The intangibles, their ownership, their allocation and valuation
The group’s TP policies	The nature of the group’s controlled transactions, the methods used for pricing
The financial and tax information	The cost sharing / cost contribution arrangements and the contributions; the tax adjustments made, with the analysis; the APAs; the MAP agreements

The Master File is the group’s TP narrative — the structure, the intangibles, the methods — and the entity-level Local Files are its applications. The consistency between the tiers (the structure vs the entity descriptions, the intangibles block vs the DEMPE records, the method register vs the declared methods, the segment data vs the CbCR rows) is the documentation set’s discipline — the reconciliation is a named step in the cycle, documented.

The maintain-and-produce obligation

Unlike the CbCR (which is filed), the Master File is maintained and produced: it must exist, contemporaneously, in the relevant entity’s possession, and be produced when the authority requests it. The practical discipline is the same as the Local File’s — the annual refresh on the group’s cycle, the event-driven update (the restructuring, the new entity, the new intangible), the version history — and the production readiness: the Master File that is produced in the proceeding is the file the Local Files cite, and the citation must be true.

The non-compliance patterns, in examination order

Pattern	Where it shows	The consequence
The file prepared after the window (the 31 May missed)	The preparation dates, the working file’s chronology	The penalty shield down — 271AA live regardless of the pricing; the “contemporaneous” character indefensible on the dates
The method block empty or inconsistent with the prior year	The method vs the prior year’s method, the PLI vs the prior year’s PLI	The method-choice question open for the TPO to answer — the substitution lands on a file that never documented its choice
The benchmark block without the matrix substance	The comparable list without the per-company reasons	The pool rejected on credibility; the TPO’s pool replaces the file’s pool
The computation block on a different cost base than the accounts	The PLI inputs vs the financial statements	The PLI re-derived on the TPO’s lines; the position moves, line by line
The Local File vs the return vs the CbCR, different numbers	The cross-tier reconciliation	The inconsistency as the finding — the credibility collapse across the documentation set, and the risk assessment’s confirmation
The Master File absent where the group is in scope	The group’s revenue vs the ₹1,000 cr threshold	The group-level narrative missing — the Local Files’ method and intangibles claims unsupported at the group level

The through-line: each non-compliance is a missing block, a missed date, or a broken consistency — and each is identifiable in the file before the notice, which is the entire point of the pre-filing audit (the 10 documentation weaknesses and the documentation pillar guide).

See also

• Local File — the Rule 10D checklist
• Master File — content and best practices
• Contemporaneous documentation
• The compliance calendar