Local File (Rule 10D): Definition, Triggers and Contents
The Local File defined: the entity-level transfer pricing documentation under Rule 10D — triggered at ₹30 cr revenue, containing the FAR, method, benchmarking and the computation.
Definition
The Local File is the entity-level transfer pricing documentation: the documentation a specific entity maintains about its own controlled transactions, under Rule 10D of the Income-tax Rules (given effect by section 92D). It is the working defence in a transfer pricing examination — the document the Transfer Pricing Officer reads, block by block.
Trigger. The obligation attaches where the entity’s revenue for the year meets the threshold (₹30 crore) and the entity has entered into an international transaction (or a specified domestic transaction). It is maintained — available, contemporaneous — not filed; the filed companion is the Form 3CEB accountant’s report.
Contents. The Rule 10D blocks: the business and management overview; the industry and economic conditions; the functional analysis; the controlled and uncontrolled transactions; the method selection and why; the assumptions; the comparable identification and the exclusion rationale (the Accept-Reject matrix); the arm’s length computation; the supporting information; and the annual update. The full checklist, item by item, is in the Local File guide.
Why it is the working defence
The Local File is where the three layers of the argument meet: the FAR (why this entity earns this kind of return), the method (why this comparison is the right one), and the benchmarking (what the comparison says). A TPO examination is a re-run of those three layers, in that order — which is why the file is built as the record of the decisions, not as a narrative around a conclusion.
Example
An Indian services entity with ₹45 cr revenue and a controlled services transaction maintains its Local File: the FAR showing a routine service provider, the method section documenting the TNMM selection with the alternatives set aside, the benchmarking annex with the twelve dispositions and the working-capital adjustment, and the computation placing its adjusted OP/OC inside the IQR. When the s.282BC notice arrives, the file — completed in the year — is produced within 30 days.
See also
FAQ
Is the Local File filed with the return? No — it is maintained and available; the Form 3CEB (the accountant’s report on the international transactions) is what is filed, with the return. The two travel together in practice but have different legal fates: a late 3CEB is a ₹1,00,000 penalty; a Local File that was never contemporaneous is a 2% penalty on the transaction value.
How often is it rebuilt? It is a yearly work product — the annual-update block is not a formality. The benchmarking is re-run each year and the file redrawn from the year’s records before the return due date.
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: 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.
Read docMaster File (Rule 10DA): Definition, Triggers and Contents
The Master File defined: the group-level transfer pricing documentation under Rule 10DA — group structure, businesses, intangibles and the financial and tax positions.
Read doc