How-to guide
How to Do Transfer Pricing for India-US Group Structure
Step-by-step guide to setting up and documenting transfer pricing between India parent and US subsidiary (or vice-versa). Mandatory under Indian Section 92.
Steps
The process.
How to do transfer pricing for india-us group structure.
Map related-party transactions
List all cross-border transactions: services, royalty, loans, share-purchase, cost-sharing. Even monthly invoices count.
Functional analysis (FAR)
Document each entity's functions, assets used, risks borne. India parent vs US sub — different FAR profiles.
Pick transfer-pricing method
Common for India-US: TNMM (Transactional Net Margin) for services. CUP (Comparable Uncontrolled Price) for products. Choose based on data availability.
Benchmarking study
Pull comparables from Prowess (India), Royalty Stat, etc. Compute arm's-length range. Apply to your transaction.
Set intercompany pricing
Cost-plus markup (typical 5-15% for routine services, 15-25% for R&D), or arm's-length royalty rate (3-7% for software, 1-3% for trademarks).
Draft intercompany agreement
Legal contract between Indian and US entity defining services, pricing, termination, IP ownership. Sign before invoicing.
Prepare TP documentation
Local file (mandatory if int'l TX > ₹1cr), Master file (if group revenue > ₹500cr), CbCR (if group revenue > €750M).
File Form 3CEB
CA-certified TP report. Mandatory by ITR due date (Oct 31 typically). Include all int'l + specified domestic transactions.
Defend in assessment
If IT assessment, respond with TP documentation. If unfavorable order, appeal to DRP/ITAT or invoke MAP under DTAA.