Transfer Pricing Services India

Transfer pricing regulations under Sections 92 to 92F of the Income Tax Act apply to every Indian company that has undertaken international transactions with associated enterprises (related parties) during the year, if the aggregate value of such transactions exceeds Rs.1 crore. Domestic transfer pricing provisions apply to specified domestic transactions above Rs.20 crore. Form 3CEB certification and TP documentation are mandatory for all companies crossing these thresholds.

Form 3CEB is a report by a Chartered Accountant certifying that the prescribed particulars of international transactions and specified domestic transactions have been correctly reported and that the arm's length price has been determined in accordance with the Income Tax Rules. It must be filed electronically on or before the income tax return due date — 30 November for companies with international transactions (or 31 October for other companies if TP provisions are not triggered).

Non-filing of Form 3CEB attracts a penalty of 2% of the value of the international transactions. Failure to maintain TP documentation attracts a penalty of 2% of the transaction value. If a TP adjustment is made and the taxpayer fails to establish that it was at arm's length, a penalty of 50% of the tax on the adjusted income applies. In cases of concealment or misreporting, the penalty is 200% of the tax on adjusted income.

An Advance Pricing Agreement (APA) is a binding agreement between a taxpayer and the tax authority (CBDT) on the arm's length price or pricing methodology for covered international transactions for a specified future period (typically 5 years, extendable). A Unilateral APA involves only India. A Bilateral APA involves India and the other country's tax authority and eliminates double taxation risk. The APA process typically takes 2–3 years to complete from application to execution but provides complete certainty on TP for covered transactions.

Yes. Indian subsidiaries of foreign multinationals are frequently selected for TP audit, particularly when they are characterised as limited risk entities (captive service providers, contract manufacturers) but earn margins above the safe harbour rates, or when the group's overall TP documentation does not adequately support the margins earned in India. Maintaining robust TP documentation aligned with the OECD BEPS Action 13 Master File and Local File framework significantly reduces audit risk.