What is BEPS?

How it works

Its measures include country-by-country reporting, the Multilateral Instrument (MLI), and the two-pillar solution, of which Pillar Two introduces a global minimum tax.

From fifteen actions to three filings

For an Indian finance team the practical residue of the BEPS project is the three-tier documentation model of Action 13. The Local File is the Rule 10D study already maintained. The Master File is Form 3CEAA, required where consolidated group revenue exceeds Rs.500 crore and aggregate international transactions exceed Rs.50 crore, or Rs.10 crore where intangibles are involved, with Form 3CEAB designating the filing entity. Country-by-Country Reporting sits in Section 286 and applies to groups with consolidated revenue above Rs.6,400 crore, filed in Form 3CEAD with intimation in Form 3CEAC.

The treaty layer: the MLI

The Multilateral Instrument rewrote large parts of India's treaty network without renegotiating a single treaty individually. In force for India from 1 October 2019, it inserted a principal-purpose test into covered agreements, tightened the agency-PE definition and narrowed the preparatory-and-auxiliary exemption. The consequence for withholding files is direct: a Tax Residency Certificate alone no longer settles treaty entitlement — substance in the residence state has to be documented.

BEPS 2.0 and what it changes

The two-pillar solution moved beyond anti-avoidance into reallocation. Pillar One reallocates a slice of the residual profit of the largest groups to market jurisdictions; Pillar Two sets a 15% minimum effective rate measured jurisdiction by jurisdiction. For India the sharp edge is Pillar Two's interaction with domestic incentives — a concessional rate under Section 115BAB or a deduction under Section 10AA can pull a jurisdictional effective rate below the floor, handing the top-up tax to another country rather than saving it for the group.

The domestic law that came out of it

Two BEPS actions landed directly in the Income-tax Act. Action 4 became Section 94B, capping deductible interest paid to a non-resident associated enterprise at 30% of EBITDA where that interest exceeds Rs.1 crore, with the disallowed amount carried forward for eight years. Action 6 arrived through the MLI's principal-purpose test, and Action 13 through Sections 92D and 286. Reading BEPS purely as an international-policy story understates it — for an Indian group it is a set of live computational limits and filing deadlines.

This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.