Rule 10D: Local File Requirements, Block by Block

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 the documentation duty in section 92D. Where the section says the documentation must exist and be maintained, Rule 10D says what it must contain, block by block, and when it must be prepared and produced.

What the provision says

In plain English: where the aggregate value of the person’s international transactions and specified domestic transactions in the financial year exceeds ₹300 million (₹30 crore), the person maintains the Local File — the rule’s content blocks, on the year’s actuals — prepared within 30 days of the financial year end (by 31 May), maintained for 8 years, and produced on the section 282BC notice within the specified window. Below the threshold, there is no Rule 10D documentation obligation for the year; the pricing obligation under section 92(1) continues regardless — the rule obliges the documentation, not the pricing.

The operative requirements

Element	Requirement
The trigger	The aggregate value of the international + specified domestic transactions in the financial year exceeds ₹300 million (₹30 crore) — a yearly computation on the aggregate, so a crossing year carries the first file
Preparation	Within 30 days of the financial year end — by 31 May — the file on the year’s actuals, completed and dated in the window
Retention	8 years from the end of the financial year — the file and the working file behind it (the matrix, the evidence, the overrides)
Production	On the section 282BC notice, within the specified period (the standard 30-day window) — a retrieval of the existing documentation, not a construction
The content	The rule’s content blocks, below — the FAR, the transaction inventory, the method record, the benchmark, the computation, the assumptions, the annual update

The content blocks

Block	What it must show
Business and management overview	Ownership, management, organisation, strategy — the entity’s profile
Industry and economic conditions	The industry, market, competition, supply chain
FAR profile	The functions performed, assets employed and risks assumed of each enterprise in the transaction — the functional analysis as the documentation’s foundation
Controlled transactions	The nature, terms, amount and counterparties of the international and specified domestic transactions — the scope of the documentation
Uncontrolled transactions	The unrelated transactions relied on as comparables
Method selection	The method chosen and why it is the most appropriate — the best-method record, the choice documented not implied
Assumptions and interpretations	The assumptions and legal interpretations relied on — the assumptions stated are the assumptions examinable
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 — the PLI, the pool, the range, the tested party’s position
Supporting information	The other data, statistics and documents relied on
Annual update	The data refreshed each year; the prior-year comparables re-screened

Key excerpts (the provision’s core, framed)

• The emphasis falls on the last three blocks — 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. A matrix without per-company reasons is a matrix the TPO substitutes.
• The rule prescribes content, not a form. The blocks are the study’s exhibits organised for the examiner — the Local File is, in substance, the FAR, the transaction list, the method choice, the benchmark and the computation, written as the documentation.
• The three mechanics are the penalty protection’s conditions in operational form: prepared in the window, produced on time, maintained for the period — all three holding keeps the section 271AA penalty off (see the penalty protection glossary); any one failing, the exposure is live.

What it means in practice

• The examination follows the blocks in order. The TPO works through the FAR first (it frames everything), the method second (it decides the comparison), the comparables third (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. The sequence is mapped in the TPO glossary.
• The 31 May window is the contemporaneity that earns the shield. The benchmarking re-run that feeds the file must finish before the window closes; a file prepared in the examination is not the contemporaneous file, whatever its cover page says. See contemporaneous documentation.
• The production is a retrieval, not a construction. The 282BC notice arrives against a file that already exists — indexed, reconciled, with the matrix and the per-company reasons behind every disposition. The response is the file; the file is the defence.
• The blocks are the audit’s outline. The non-compliance patterns the examination finds — the empty method block, the matrix without substance, the computation on a different cost base than the accounts, the Local File / return / CbCR inconsistency — are each a missing block, a missed date, or a broken consistency, all identifiable before the notice. The full checklist and the deep dive are in the Local File guide and the Rule 10D and 10DA guide.

Related docs

• Rule 10D — the glossary entry
• Local File — the content checklist
• Rule 10D and 10DA deep dive
• Section 282BC — the production notice