Complete guide to transfer pricing in India for foreign companies. Learn about arm's length price, transfer pricing documentation, reporting requirements, and get expert assistance.
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Complete guide to transfer pricing in India for foreign companies. Learn about arm's length price, transfer pricing documentation, reporting requirements, and expert assistance for compliance.
Transfer pricing refers to pricing of transactions between related parties. In India, transfer pricing rules require transactions to be at arm's length price to prevent profit shifting and tax avoidance.
Arm's length price is the price that would be charged in a transaction between unrelated parties under similar circumstances. It ensures fair pricing in related party transactions.
Transfer pricing rules apply when a foreign company transacts with its related parties in India. Rules apply if international transactions exceed specified thresholds or domestic transactions exceed ₹20 crores.
Transfer pricing documentation includes master file, local file, and country-by-country report. It demonstrates that transactions are at arm's length price and complies with transfer pricing regulations.
Non-compliance with transfer pricing rules can result in adjustments to taxable income, interest on adjustments, and penalties. Penalties can be up to 200% of tax on adjustments.
Yes, companies with international transactions above threshold must file Form 3CEB (transfer pricing report) along with income tax return. Documentation must be maintained and submitted when required.
Related party transactions include transactions between company and its parent, subsidiaries, associates, or entities with common control. These transactions must be at arm's length price.
Arm's length price is determined using methods like Comparable Uncontrolled Price (CUP), Resale Price Method, Cost Plus Method, Profit Split Method, or Transactional Net Margin Method (TNMM).
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