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Transfer Pricing and Returns
& Compliances

Transfer Pricing Services for Businesses | Expert Solutions for Tax Compliance, Documentation, and Risk Mitigation | Global Transfer Pricing Strategies | Hire Professional Transfer Pricing Consultants
Custom Transfer Pricing Solutions for International Businesses | Transfer Pricing Documentation, Compliance, and Planning | Hire Experienced Transfer Pricing Experts for Global Tax Efficiency

What is Transfer Pricing?

Transfer pricing refers to the pricing of goods, services, and intangibles transferred between related entities within a multinational enterprise (MNE). It ensures that transactions between associated enterprises are conducted at an arm’s length price, i.e., the price that would have been charged between unrelated entities in similar conditions.

Why is Transfer Pricing Important?

  • Regulatory Compliance: Ensures compliance with Indian tax laws and international guidelines.

  • Tax Optimization: Helps businesses legally optimize their tax liabilities.

  • Avoids Penalties: Prevents legal issues and hefty penalties due to non-compliance.

  • Transparency: Enhances credibility with tax authorities and stakeholders.

  • Global Standardization: Aligns with OECD and BEPS (Base Erosion and Profit Shifting) guidelines.

Transfer Pricing Regulations in India

The transfer pricing regulations in India are governed by Sections 92 to 92F of the Income Tax Act, 1961 and the Income Tax Rules, 1962. The Central Board of Direct Taxes (CBDT) provides further guidance through circulars and amendments.

Key Provisions

  1. Arm’s Length Price (ALP): All related party transactions must be conducted at an arm’s length price.
     

  2. Specified Domestic Transactions (SDTs): Transactions between domestic entities exceeding Rs. 20 crores are covered.
     

  3. Transfer Pricing Methods:

    • Comparable Uncontrolled Price (CUP) Method

    • Resale Price Method (RPM)

    • Cost Plus Method (CPM)

    • Profit Split Method (PSM)

    • Transactional Net Margin Method (TNMM)

    • Other Methods as prescribed by CBDT
       

  4. Transfer Pricing Documentation: Companies must maintain detailed documentation of intercompany transactions.
     

  5. Annual Compliance: Filing of Form 3CEB by a Chartered Accountant.
     

  6. Advance Pricing Agreement (APA): Allows companies to agree on transfer pricing principles in advance with tax authorities.

Key Provisions of Transfer Pricing Regulations | Understanding Transfer Pricing Rules for Tax Compliance and Global Transactions | Expert Transfer Pricing Advisory Services for Multinational Corporations

Tax Rates Applicable for Transfer Pricing in India

The tax rates applicable to companies engaged in international transactions depend on their nature and classification:

Category
Tax Rate
Domestic Companies (Turnover up to Rs. 400 Cr)
25% + Surcharge + Cess
Domestic Companies (Turnover above Rs. 400 Cr)
30% + Surcharge + Cess
Companies opting for Section 115BAA (Manufacturing Companies)
22% + Surcharge + Cess
Companies opting for Section 115BAB (New Manufacturing Companies)
15% + Surcharge + Cess
Foreign Companies
40% + Surcharge + Cess
Transfer Pricing Adjustments (Penalty for Underreporting)
50%-200% of the tax payable

Process of Transfer Pricing Compliance in India

Step 1: Identify International or Specified Domestic Transactions

  • Determine all transactions with related parties exceeding the threshold limit.
     

Step 2: Selection of Appropriate Transfer Pricing Method

  • Choose the most suitable method from the prescribed ones to determine the arm’s length price.
     

Step 3: Preparation of Transfer Pricing Documentation

  • Maintain a Master File and Local File containing transaction details, pricing methods, and economic analysis.
     

Step 4: Audit & Certification

  • Obtain certification from a Chartered Accountant (CA) in Form 3CEB before the due date.

  • ​

Step 5: Filing Transfer Pricing Returns

  • Deadline: Form 3CEB must be filed by 30th November of the assessment year.
     

Step 6: Assessment & Scrutiny by the Tax Authorities

  • The Income Tax Department may scrutinize cases where transactions are not at arm’s length.

Timeline for Transfer Pricing Compliance

Task
Deadline
Identification of Transactions
Ongoing
Transfer Pricing Documentation
By 31st October
Form 3CEB Filing
By 30th November
Master File Submission
By 30th November
Country-by-Country Reporting (if applicable)
By 31st December

Documents Required for Transfer Pricing Compliance

Documents Required for Transfer Pricing Compliance | Essential Transfer Pricing Documentation for Tax Filing and Audits | Expert Guidance on Transfer Pricing Compliance for Businesses
1. Master File (Form 3CEAA)

Ownership structure of the entity

Description of the group’s business

Intangible assets and financial transactions within the group

2. Local File (Form 3CEAB)

Detailed analysis of controlled transactions

Functional, risk, and economic analysis

Financial statements and transfer pricing calculations

3. Form 3CEB

  • Certified by a Chartered Accountant

  • Provides details of international and domestic related party transactions

4. Advance Pricing Agreement (APA) Documents 

  • If Applicable

Common Transfer Pricing Challenges
& Solutions

Challenge
Solution
Lack of proper documentation
Maintain Master & Local files rigorously
Selection of appropriate pricing method
Conduct a comparative analysis with industry benchmarks
Managing disputes with tax authorities
Consider Advance Pricing Agreements (APA)
Changes in international guidelines
Stay updated with OECD & BEPS changes

Frequently asked questions

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