Short answer: a primary adjustment of ₹1 crore or more obliges you to make a secondary adjustment. You then have ninety days to bring the money into India. Miss it and the excess is treated as a loan to your associated enterprise, carrying interest — or you can elect to pay 18% on it and stop the clock.
← All articles
Secondary adjustment under Section 92CE, now Section 170
CA K Sanjay Bhargav, Chartered Accountant, Bengaluru
Membership No. 250054 · DISA (ICAI)
Published
The gap it exists to close
A primary adjustment is an accounting event. The department says your Indian entity should have earned ₹100 rather than ₹80, and taxes it on ₹100.
But the ₹20 never actually arrived. It is still sitting with the parent. The Indian company has paid tax on money it does not have, and the group's cash is allocated one way while its taxable profits are allocated another.
Section 170 — the old Section 92CE — closes that gap. Its own definition puts it plainly: a secondary adjustment is an adjustment in the books of both enterprises to make the actual allocation of profits consistent with the transfer price determined by the primary adjustment, "thereby removing the imbalance between cash account and actual profit".
The mechanism is blunt. Bring the money in, or it becomes a loan you are deemed to have made.
The trigger, and a boundary that moved
Section 170(1) applies where a primary adjustment of one crore rupees or more arises in one of five ways:
| How the primary adjustment arose | |
|---|---|
| 1 | Made suo motu by the assessee in the return |
| 2 | Made by the Assessing Officer and accepted |
| 3 | Determined by an advance pricing agreement (s.168) |
| 4 | Made under the safe harbour rules (s.167) |
| 5 | Arising from a mutual agreement procedure resolution (s.159) |
The ₹1 crore figure has not changed. The boundary has.
Old Section 92CE came at it from the other direction: a proviso said the section did not apply where the amount of the primary adjustment "does not exceed one crore rupees". An adjustment of exactly ₹1,00,00,000 does not exceed one crore — so it fell outside. Section 170(1) states the test positively as "one crore rupees or more", and exactly ₹1 crore now falls inside.
Same number. Opposite answer at the line.
Two other things have gone from the section, and neither is a relaxation. The old proviso also excluded adjustments for an assessment year commencing on or before 1 April 2016, and the old APA limb only counted agreements entered into on or after 1 April 2017. Both were transitional, and both are simply spent.
Ninety days — but from when?
Rule 83 — the old Rule 10CB — sets the repatriation window at ninety days. The catch is that it runs from a different date in each case:
| How the adjustment arose | Ninety days runs from |
|---|---|
| Suo motu, in the return | The return due date |
| An officer's or appellate order, accepted | The date of that order |
| An APA entered into on or before the return due date | The return due date |
| An APA entered into after the return due date | The end of the month the APA was signed |
| The safe harbour option | The return due date |
| A mutual agreement procedure resolution | The date of the order giving effect to it |
Where the return due date is what the clock hangs off, it is 30 November for a case in which the accountant's report under s.172 is required — s.263(1)(c) puts every such assessee on that date. So on the three rows above that run from the return due date, the ninety days ordinarily expires at the end of February. Bear in mind that a CBDT extension of the return due date carries that clock with it.
Three of the six hang off the return due date, which is the one people assume applies universally. It does not — an accepted assessment order starts the clock on the date of the order, which is usually a good deal earlier than the next return due date, and that is where the window quietly gets missed.
One helpful piece of flexibility: under Section 170(3) the money may be repatriated from any of your associated enterprises that is not resident in India — not only the one the transaction was actually with. In a group with several offshore entities, the cash can come from wherever it sits. That was an Explanation to the old Section 92CE(2), now promoted into a sub-section.
What the interest actually runs at
Miss the ninety days and the excess money is deemed an advance to the associated enterprise, with interest imputed under Rule 83(2):
| Transaction denominated in | Rate |
|---|---|
| Indian rupees | SBI one-year MCLR as on 1 April of the tax year + 325 basis points |
| Foreign currency | The reference rate for that currency as on 30 September + 300 basis points |
The rupee limb is unchanged from the old rule. The foreign-currency limb is where the real change is, and it is the thing most guidance still has wrong.
Old Rule 10CB(2)(ii) specified six-month LIBOR. LIBOR no longer exists. Rule 83(2)(b) replaces it with a currency-specific reference rate defined in Rule 89(3):
| Currency | Reference rate |
|---|---|
| US dollar | 6-month Term SOFR, plus 45 basis points |
| Euro | 6-month EURIBOR |
| UK pound sterling | 6-month Term SONIA, plus 30 basis points |
| Japanese yen | 6-month TORF, plus 10 basis points |
| Australian dollar | 6-month BBSW |
| Singapore dollar | 6-month Compounded SORA, plus 45 basis points |
Read the two provisions together, because the uplifts stack. The per-currency addition above is part of the definition of the reference rate. Rule 83(2)(b) then adds its 300 basis points on top of that. So a US dollar transaction runs at six-month Term SOFR + 45 + 300 basis points — not SOFR plus 300. Getting this wrong understates the exposure by nearly half a percentage point every year it runs.
The 18% way out, worked through
Section 170(5) gives an option: instead of repatriating, pay additional income-tax at 18% on the excess money. The rate is unchanged from the old Section 92CE(2A).
Take a primary adjustment of ₹5 crore that has not been repatriated.
If you leave it outstanding. Interest runs on ₹5 crore. Every one percentage point of rate costs ₹5 lakh a year. The statutory spread alone — the 325 basis points on the rupee limb — is ₹16.25 lakh a year before the MCLR underneath it is even added. And it keeps running, every year, until the money comes in.
If you elect to pay. 18% of ₹5 crore is ₹90 lakh, once. Surcharge and cess are levied separately under the Finance Act and are not included in that figure.
That is the actual trade: a one-off charge against an open-ended one. But the election is unforgiving in three ways, and all three come straight from the section:
- It is final. The tax is the final payment on the unrepatriated amount, and no credit for it may be claimed — by you or by anyone else (s.170(6)).
- No deduction is allowed for the amount it was paid on (s.170(7)).
- It is not retrospective. Section 170(8) stops the secondary adjustment and the interest from the date of payment. Interest that accrued between the end of the ninety days and the date you paid is not wiped out.
That last point is the one that decides timing. The election is worth taking early or not at all; taken late, you pay the 18% and the interest that ran while you were deciding.
What to do with this
- Date the trigger. Which of the six start dates applies to your adjustment
- Count the ninety days from that date, not from the return due date by habit
- Check the currency, because it decides which interest limb applies
- If it is foreign currency, use the reference rate, not LIBOR, and stack both uplifts
- Decide on the 18% election before the interest has run, not after
The annual filings that sit around all of this — the accountant's report, the Master File and country-by-country reporting, and the penalty structure behind them — are in the transfer pricing filings a captive makes. Where an adjustment came out of a safe harbour election, the terms of that route are in the 2026 safe harbour rules.
This is a working reference on the general framework, not advice on a particular adjustment. The threshold, the repatriation period, the interest formula and the 18% rate are taken from Sections 92CE and 170 and Rules 10CB, 83 and 89(3) as published by the department; the surcharge and cess on the additional income-tax, and the market rates that feed the interest computation, are not stated here. Which numbering applies depends on the year in question. Confirm the position for your own adjustment before acting on it.
Frequently asked questions
When does a secondary adjustment apply?
Section 170(1) — the old Section 92CE — requires one where a primary adjustment to the transfer price of one crore rupees or more arises in any of five ways: made suo motu by the assessee in the return, made by the Assessing Officer and accepted, determined by an advance pricing agreement, made under the safe harbour rules, or arising from a resolution under the mutual agreement procedure. There is no discretion in it once the trigger is met.
Has the ₹1 crore threshold changed?
The figure has not, but the boundary has. Old Section 92CE approached it by exclusion: a proviso said the section did not apply where the primary adjustment 'does not exceed one crore rupees'. An adjustment of exactly ₹1,00,00,000 does not exceed one crore, so it escaped. Section 170(1) states the test positively as 'one crore rupees or more', which brings exactly ₹1 crore inside. Same number, opposite answer at the boundary.
How long do we have to bring the money back?
Ninety days, under Rule 83 — the old Rule 10CB. But the ninety days runs from a date that depends on how the adjustment arose: the return due date where it was made suo motu, under the safe harbour rules, or under an advance pricing agreement entered into on or before that due date; the date of the order where an officer's or appellate adjustment was accepted; the end of the month the agreement was signed where an APA came later; and the date of the order giving effect where it followed a mutual agreement procedure resolution.
What is the interest rate on unrepatriated money?
For a rupee-denominated transaction it is the State Bank of India one-year MCLR as on 1 April of the tax year plus 325 basis points, which is unchanged. For a foreign-currency transaction the old rule pointed at six-month LIBOR, which no longer exists; Rule 83(2)(b) now uses the currency-specific reference rate defined in Rule 89(3) as on 30 September, plus 300 basis points. Several of those reference rates carry an uplift inside their own definition, so a US dollar transaction runs at six-month Term SOFR plus 45 basis points plus a further 300 — not SOFR plus 300.
Can we pay tax instead of repatriating the money?
Yes. Section 170(5) gives the assessee the option to pay additional income-tax at 18% on the excess money instead of bringing it back. The rate is unchanged from the old Section 92CE(2A). It is a genuine election, not a penalty, but it is expensive and final: the tax is the final payment on that amount, no credit for it may be claimed by anyone, and no deduction is allowed for the sum it was paid on. Surcharge and cess are levied separately under the Finance Act.
Does paying the 18% wipe out the interest already accrued?
No. Section 170(8) says that where the additional income-tax is paid, no secondary adjustment is required and no interest is computed from the date of payment of that tax. Interest that accrued between the end of the ninety days and the date the tax was paid is not undone by paying it. That is why the election is worth deciding early rather than once the position has been running for a year.
Does the money have to come from the enterprise we transacted with?
No. Section 170(3) — which was an Explanation to Section 92CE(2) before being promoted into a sub-section of its own — allows the excess money to be repatriated from any of the assessee's associated enterprises that is not resident in India. In a group with several offshore entities that is a practical flexibility worth knowing about, because it means the repatriation can be routed from wherever the cash actually sits.
Facing a transfer pricing adjustment with money still sitting abroad?
Send the adjustment, the date it arose and the currency of the transaction. Whether the ninety days has started, what the interest is running at, and whether the 18% election is cheaper than repatriating are worked out together — before the clock has run, which is when there are still choices.
Related service: GCC & Captive Units