What is transfer pricing in India?

Transfer pricing rules under Section 92-92F of the Income Tax Act require associated enterprises (group companies) to transact at arm's length pricing. Indian TP regime covers cross-border transactions with international group companies and specified domestic transactions. Non-compliance attracts penalties of 100–300% of adjustment plus prosecution risk.

What is the arm's length principle?

The arm's length principle states that prices between related parties should be the same as prices between independent parties in comparable transactions. India follows OECD guidelines on arm's length pricing. Five methods are prescribed: CUP, Resale Price Method, Cost Plus Method, Profit Split Method, and Transactional Net Margin Method (TNMM).

Who needs to comply with India's transfer pricing rules?

Indian residents undertaking international transactions with associated enterprises (any related-party transaction with a non-resident group entity) must comply. Specified domestic transactions above ₹20 crore are also covered. There is no de minimis threshold — any cross-border related-party transaction triggers TP compliance.

What is Form 3CEB and when is it filed?

Form 3CEB is the transfer pricing audit report under Section 92E, certified by a chartered accountant. It must be filed by every person who entered into international or specified domestic transactions during the year, on or before the due date of ITR filing (currently October 31 for most taxpayers).

What is a Master File and when is it required?

Master File (Form 3CEAA) is a high-level report on the group's global business, organisation structure, intangibles, intercompany financial activities, and tax positions. Required when consolidated group revenue ≥ ₹500 crore. Filed annually with the Income Tax Department.

What is Country-by-Country Reporting (CbCR)?

CbCR (Form 3CEAD) requires multinational groups with consolidated revenue ≥ €750 million (approx ₹6,750 crore) to report aggregate financial and tax information per jurisdiction. The parent files in its home country; Indian entities file a notification of the CbCR filer.

What are Safe Harbour Rules?

Safe Harbour Rules (Section 92CB) allow taxpayers to opt for prescribed margins or percentages for specific transactions — software development services, IT-enabled services, contract R&D, KPO, intra-group loans. Acceptance by tax authorities is automatic, avoiding lengthy TP litigation.

What is an Advance Pricing Agreement (APA)?

APA (Section 92CC) is a binding agreement between taxpayer and CBDT on the arm's length price methodology for future transactions. Unilateral, bilateral, or multilateral APAs are available. Provides certainty for 5 years (rolled back 4 years). Increasingly used for complex high-volume transactions.

How is royalty paid to non-residents taxed?

Royalty paid to non-resident associated enterprises is subject to: (a) withholding tax in India under Section 195 — lower of IT Act rate or DTAA rate; (b) transfer pricing test on arm's length pricing; (c) deduction allowability under Section 40(a)(i). MFN clauses in some DTAAs further reduce withholding rates.

What is Permanent Establishment (PE) risk?

PE is a fixed place of business through which the non-resident's business is wholly or partly carried on. PE creation triggers Indian taxation of the non-resident's business profits attributable to PE. Common PE triggers: branch, factory, employees in India for > prescribed period, dependent agent. We help structure to manage PE risk.

What is BEPS and how does it affect Indian companies?

BEPS (Base Erosion & Profit Shifting) is OECD's 15-action framework. India has implemented: Multilateral Instrument (MLI) modifying tax treaties, CbCR, Master File, equalisation levy on digital advertising and e-commerce, Place of Effective Management (POEM), and Significant Economic Presence (SEP). Pillar 2 (15% global minimum tax) implementation underway for large groups.

How can transfer pricing disputes be resolved?

Multiple options: (a) Dispute Resolution Panel (DRP) for unfavourable assessments, (b) Income Tax Appellate Tribunal (ITAT) for adverse DRP orders, (c) Mutual Agreement Procedure (MAP) under DTAA for double taxation, (d) APA prospectively to avoid disputes. Our cross-border tax practice handles all four.

Cross-Border Tax & Transfer Pricing

Transfer Pricing

Transfer pricing advisory in India by a CA-led firm. We handle the full lifecycle — functional analysis, benchmarking, documentation (Local File, Master File, CbCR), Form 3CEB certification, and dispute defense including APA and MAP. Built for multinational groups, Indian parents of foreign subsidiaries, and inbound investors who need their cross-border pricing to hold up under scrutiny.

Coverage

Full transfer-pricing lifecycle.

Compliance, structuring, documentation and defense — all under one CA-led roof.

Identification & characterisation of international transactions
Functional, asset and risk (FAR) analysis
Benchmarking studies using Prowess, Capitaline, RoyaltyStat
Method selection — CUP, RPM, CPM, PSM, TNMM
Local File (mandatory) and Master File preparation
Country-by-Country Reporting (CbCR) for large groups
Form 3CEB audit and certification
Safe Harbour Rules opt-in advisory
Advance Pricing Agreement (APA) — unilateral, bilateral, multilateral
Mutual Agreement Procedure (MAP) for treaty-based dispute resolution
TP assessment defense, DRP & ITAT representation
Cross-border restructuring — IP migration, value chain redesign

The process

Transfer-pricing workflow.

A structured sequence we follow for every TP mandate.

Step 01 / 08

Identify Related-Party Transactions

List all international and specified domestic transactions with associated enterprises — sale, purchase, services, royalty, loans, guarantees, cost sharing.

Step 02 / 08

Functional Analysis

Document functions performed, assets used, and risks borne (FAR analysis) by each entity in the value chain.

Step 03 / 08

Benchmarking Study

Search comparable independent transactions using databases (Prowess, Capitaline, Royaltystat) to determine arm's length range.

Step 04 / 08

Method Selection

Select most appropriate method — CUP, RPM, CPM, PSM, TNMM — based on transaction nature and data availability.

Step 05 / 08

Computation of Arm's Length Price

Apply the selected method, compute ALP, and benchmark actual transaction prices against the range.

Step 06 / 08

Documentation

Prepare Local File (mandatory > ₹1 crore threshold), Master File (> prescribed threshold), and CbCR (> €750M consolidated revenue).

Step 07 / 08

Form 3CEB Certification

Get audited and certified by an accountant in Form 3CEB. File before due date of income tax return.

Step 08 / 08

Defense & Dispute Resolution

Maintain robust documentation for assessment, represent at DRP, ITAT, High Court if disputes arise. Consider Safe Harbour, APA, MAP.

Where it matters

Cross-border transactions we cover.

Common scenarios where TP discipline determines whether your global structure holds up.

Indian parent — foreign subsidiaries: cost-sharing, royalty, services
Foreign parent — Indian subsidiary: contract R&D, IT services, manufacturing
Intra-group financial transactions — loans, guarantees, cash pooling
IP licensing and royalty arrangements across jurisdictions
Cost-plus services from Indian shared service centres (SSC)
Contract R&D and KPO under Safe Harbour Rules
Permanent Establishment (PE) attribution
Significant Economic Presence (SEP) and BEPS Pillar 1 matters

Adjacent services

Cross-border tax practice.

Transfer pricing sits at the centre of our broader international tax work.

Ready to comply

Discuss your transfer pricing.

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