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Transfer Pricing

Transfer Pricing refers to the pricing of goods, services, or transactions between related entities of a multinational enterprise (MNE). It ensures that cross-border transactions between associated enterprises are conducted at an Arm’s Length Price (ALP) as per the Income Tax Act, 1961.

Transfer Pricing regulations aim to prevent profit shifting and ensure fair taxation in international transactions.

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Transfer Pricing

What is Transfer Pricing?

When two related companies (such as a parent company and its subsidiary) engage in transactions, the price charged must be comparable to the price that would have been charged between independent parties under similar circumstances.

In India, Transfer Pricing provisions apply to:

  • International transactions between associated enterprises

  • Specified domestic transactions (in certain cases)

Who Needs Transfer Pricing Compliance?

  • Multinational companies operating in India

  • Indian subsidiaries of foreign companies

  • Companies with foreign group entities

  • Businesses entering into cross-border transactions

  • Entities exceeding prescribed transaction thresholds

Types of Transactions Covered

  • Sale or purchase of goods

  • Provision of services

  • Royalty payments

  • Interest on loans

  • Transfer of intangible assets

  • Cost-sharing arrangements

Methods for Determining Arm’s Length Price

As per Indian Transfer Pricing regulations, the following methods are commonly used:

  • Comparable Uncontrolled Price (CUP) Method

  • Resale Price Method (RPM)

  • Cost Plus Method (CPM)

  • Transactional Net Margin Method (TNMM)

  • Profit Split Method (PSM)

  • Other prescribed methods

Compliance Requirements

  • Maintenance of Transfer Pricing documentation

  • Accountant’s Report in Form 3CEB

  • Benchmarking analysis

  • Filing disclosures in Income Tax Return

  • Compliance with Safe Harbour Rules (if applicable)

Penalties for Non-Compliance

  • Heavy monetary penalties

  • Adjustment in taxable income

  • Increased tax liability and interest

  • Litigation and scrutiny

How Logicway Advisors Can Help

We provide comprehensive Transfer Pricing services:

  • Transfer Pricing study & benchmarking

  • Documentation preparation

  • Form 3CEB certification support

  • Advisory on international transactions

  • Litigation & assessment support

  • Advance Pricing Agreement (APA) guidance

Ensure Compliant & Defensible Cross-Border Transactions

Protect your business from tax risks with expert Transfer Pricing advisory. Contact Logicway Advisors today for professional compliance and strategic planning support.