Due to globalization of economy, commercial transactions between the different parts of the multinational groups may not be subject to the same market forces shaping relations between the two independent firms. Transfer price is a price which represents the value of good; or services between independently operating units of an organisation. But, the expression “transfer pricing” generally refers to prices of transactions between associated enterprises which may take place under conditions differing from those taking place between independent enterprises. It refers to the value attached to transfers of goods, services and technology between related entities. It also refers to the value attached to transfers between unrelated parties which are controlled by a common entity.
Frequently Asked Questions
Foreign transactions and specified domestic transactions between associated enterprises (AE) are subject to transfer pricing provisions.
International transactions refer to transactions involving one of the following activities between two or more AEs:
- Sale, purchase or lease of property that is tangible or intangible;
- Provision of facilities or deals on cost-sharing;
- Capital lending or borrowing;
- A corporate restructuring or reorganization arrangement with a related enterprise, irrespective of its effect on benefit, revenue, losses or assets and/or assets.
- Any other transaction relating to the gains, expenses , losses, or properties of such undertakings.
A study on transfer pricing explores the pricing of transactions between two or more associates involved. Through the implementation and recording of different test methods, it is determined if transactions are carried out under market conditions and are subject to inspection by the IRS and other tax authorities.
As a way to preserve its tax base, the Indian government relies on transfer pricing. Latest case law developments reflect on this protectionism. India exempts wholly domestic companies and focuses on foreign companies to better enforce its tax base issues.... A centralised return mechanism is not used by India.
In transactions between two linked (associated) parties within the same taxable jurisdiction is known as domestic transfer pricing.
Current provisions under Section 92BA of the Income Tax Act , 1961, require an assessment to comply with the provisions on transfer pricing if the aggregate amount of Defined Domestic Transactions (SDT) during an assessment year exceeds INR 20 crore.
The following sections are the Important sections related to transfer pricing as per Income Tax Act, 1961
- Section 92 of the Income Tax Act, 1961
- Section 92B of the Income Tax Act, 1961
- Section 92A of the Income Tax Act, 1961
- Section 92E – Audit Under Transfer Pricing
Transfer pricing methods are:
- Comparable uncontrolled price (CUP) method. The CUP method is grouped (as opposed to the transaction benefit method) as a conventional transaction method by the OECD
- Resale price method.
- Cost-plus method.
- Transaction net margin method (TN MM)
- Transaction profit split method.
We AVS & ASSOCIATES Chartered Accountants has well-structure plan for documentation and certification/audit procedure under Transfer Pricing Law in India. Our services include:
2. Legal Opinion
4. TP Audit
5. Computation of Arm Length Price
Why Select Us?
Our foremost priority is to provide Instant Support and are always very particular on adherence of timely delivery so that you don’t miss out on deadline. We have worked with some most time strict clients and we have never missed our target. Our one thumb rule says that “If we miss a deadline we are out”. Accounts and Finance function need always alert eagle eye approach!
Our prices are most reasonable and under budget that you never realize any cost burden in your organization in comparison of value addition we bring in. We believe in adoption of your business first and fee shall take care of itself mantra. We never bill for disappointment and take ownership. It is how we like to be treated and that is how our customers are served.
We at AVS & Associates only recruit experienced, skilled professionals who have proven expertise in their field. With a diverse Team of Chartered Accountants, Company Secretaries, Lawyers, and various other consultants on board, we offer end to end financial and legal service under one roof saving time and energy and bring synergy effect between various functions.
Having over 20+ years experience in the leadership team ensure we maintain highest ethical standards and never go out of trust with you. We always believe in long term relationship with our clients hence integrity is something we value the most. We ensure transparency in communication, service and cost. Our specialized experts helps in maintaining high quality.