Transfer pricing India, when parent is foreign.

India's TP applies when:

• An Indian company has transactions with an Associated Enterprise (AE), AND
• The transaction qualifies as an International Transaction or Specified Domestic Transaction.

Associated Enterprise (Section 92A):

• Direct or indirect participation in management, control, or capital (26%+ shareholding, 26%+ voting, etc.).
• Common management / control of both enterprises.
• Guarantee / loan providing > 51% total.
• Appointment of > 50% of board members.

Indian subsidiary of US parent: AE. Indian subsidiary of UK parent via Singapore holdco: both US / UK / Singapore are AE.

International Transaction (Section 92B): any transaction between AEs that affects profits, income, losses, or assets — purchase/sale of goods, services, intangibles, lending/borrowing, guarantees, cost sharing, business restructuring.

Threshold for TP documentation: aggregate international transactions > INR 1 crore in the FY → Section 92D documentation required.

Form 3CEB is a transfer pricing audit certificate issued by a Chartered Accountant, filed as part of the Indian company's annual tax return. Required for:

• Every taxpayer with international transactions above INR 1 crore in the FY (effectively every foreign-subsidiary).
• Due date: 31 October of the AY (vs 31 July for non-TP taxpayers).

Form 3CEB covers:

• List of all international transactions with each AE — by nature (goods, services, intangibles, financing, cost allocation, business restructuring).
• Transaction value in INR + description.
• Arm's-length method chosen (CUP, Resale Price Method, Cost Plus Method, TNMM, PSM, Other Method).
• Benchmarking analysis supporting arm's-length conclusion.
• Material facts and specific adjustments / documentation.

Underlying documentation: Section 92D requires detailed TP documentation to be maintained (not filed, but produced if asked): entity profile, industry analysis, functional analysis, economic analysis / benchmarking study. Must be contemporaneous (prepared by the time of filing Form 3CEB, not after a scrutiny notice).

Finance Act 2016 introduced BEPS-aligned Master File and Country-by-Country Report (CbCR) requirements.

Master File (Form 3CEAA): required for any Indian entity which is part of an international group where:

• Consolidated group revenue in preceding year > INR 500 crore (~USD 60 million), AND
• Aggregate value of international transactions > INR 50 crore OR international transactions pertaining to intangibles > INR 10 crore.

Contents: group overview, business strategy, group's intangibles, group's intercompany financing, group's financial + tax position.

CbCR (Form 3CEAD): required for any ultimate parent of an international group with consolidated revenue > INR 6,400 crore (~EUR 750 million, aligned with BEPS Action 13).

• Primary filing obligation on the ultimate parent (if India).
• Secondary filing (Form 3CEAC & 3CEAD) on Indian subsidiary of foreign parent if parent country has no CbCR regime or no information-sharing MoU.

Contents: country-by-country breakdown of revenue, profit, tax paid, employees, tangible assets.

BEPS Pillar 2 (Global Minimum Tax, 15%): India implementing from FY 2025-26 for groups with consolidated revenue > EUR 750M. Separate GloBE compliance alongside TP. See our Pillar 2 guide.

For taxpayers wanting certainty on TP position: Section 92CC Advance Pricing Agreement with CBDT.

• Unilateral APA: with CBDT only.
• Bilateral APA: between CBDT and competent authority of the other country (US, UK, Japan, Singapore — most useful).
• Multilateral APA: three or more jurisdictions.

Duration: 5 years prospective + 4 years rollback = up to 9 years of certainty.

Benefits:

• No TP scrutiny for covered transactions during APA period.
• Removes double-taxation risk (bilateral APA).
• Reduces litigation cost / management time.

Timeline: typically 24-36 months from filing to signing. Expensive upfront but valuable for groups with large recurring intercompany transactions.

• Low operating margin on contract services: Indian subsidiary providing IT / BPO services to foreign parent at 10% net margin. Indian comparables typically show 15-18%. Addition likely at ~5% of cost base.
• Royalty rate on licensed brand / technology: too low (parent extracting value) or too high (shifting profit to parent). Benchmarking against royalty databases (e.g., RoyaltyStat, ktMINE) + comparability adjustments.
• Guarantee fee for parent's bank guarantee: Indian subsidiary paying nil or symbolic guarantee fee to parent for parent-provided guarantee. CBDT expects fee at ~0.5-1.5% of guaranteed amount.
• Marketing intangibles (AMP / brand building): Indian subsidiary spending significantly on brand marketing in India but not getting marketing-service fee / IP reward from parent. 'Bright Line' test ADPCO cases → adjustment risk.
• Cost allocation without substance: parent allocating group HQ costs to Indian subsidiary without proper allocation key / benefit test. CBDT typically disallows allocations lacking benefit test.
• Weak benchmarking: using too few comparables, including non-comparable sized companies, cherry-picking inter-quartile range.
• Not filing Master File / CbCR when applicable: group revenue above threshold but local Indian team not aware of global filing status.

Last updated: 2026-10-13.