Talk to a specialist about transfer pricing advisory & compliance.
WhatsApp for a Free ConsultationUnderstanding Transfer Pricing Advisory & Compliance
Transfer pricing refers to the prices set for transactions between related parties — typically entities within the same multinational group operating in different countries. These transactions may involve the supply of goods, provision of services, licensing of intellectual property, lending of funds, or sharing of costs.
Indian transfer pricing law (Sections 92 to 92F of the Income Tax Act, 1961) requires that all international transactions between associated enterprises be conducted at arm's length — i.e., at the price that two independent parties dealing at arm's length would have agreed upon. The objective is to prevent the artificial shifting of profits from high-tax to low-tax jurisdictions.
Transfer pricing compliance in India requires maintaining a detailed set of documentation (Transfer Pricing Study), filing Form 3CEB (an accountant's report) along with the Income Tax Return for each year in which international transactions occur, and being prepared to defend the arm's length nature of your prices during a transfer pricing audit.
Why This Matters
- Mandatory Documentation: If the aggregate value of international transactions with associated enterprises exceeds ₹1 crore in a year, Form 3CEB must be filed and a contemporaneous Transfer Pricing Study must be maintained.
- High-stakes Audits: Transfer pricing is one of the most scrutinised areas by the Income Tax Department and the Transfer Pricing Officer (TPO). Inadequate documentation or incorrect pricing can result in additions to income and significant tax demands.
- Penalties: Penalty for non-maintenance of TP documentation: 2% of the transaction value. Penalty for concealment in TP cases: 100%–300% of tax on the adjustment amount.
- Advance Pricing Agreements (APAs): Businesses can proactively agree a transfer pricing methodology with the CBDT through an APA, providing certainty for future years.
Who Needs This Service?
- Indian subsidiaries of foreign multinational companies
- Indian companies with overseas subsidiaries, branches, or JVs
- Businesses making royalty, management fee, or loan payments to foreign related parties
- Companies with cross-border cost-sharing or centralised procurement arrangements
- E-commerce and technology companies with IP-holding structures
Why Choose Pixelex
- CA-led, legally backed: Transfer pricing disputes often end up in litigation before the ITAT and High Courts. Having a CA-Advocate team means your TP documentation and assessment defence are aligned.
- Practical benchmarking: We work with publicly available comparable databases to build defensible benchmarks — not theoretical positions that crumble under scrutiny.
- APA advisory: We advise on the feasibility and process for entering into Advance Pricing Agreements with the CBDT, providing multi-year certainty.
Our Process
- 01
Transaction Identification
We identify all international transactions with associated enterprises in the financial year, including goods, services, IP licensing, guarantees, and loans.
- 02
Benchmarking Analysis
We select the most appropriate transfer pricing method (CUP, RPM, CPM, TNMM, PSM) and conduct a benchmarking study using public databases of comparable companies.
- 03
Transfer Pricing Study
We prepare a comprehensive Transfer Pricing Study (TP documentation) covering: company overview, industry analysis, functional analysis, comparables search, and pricing method justification.
- 04
Form 3CEB
We prepare and certify Form 3CEB (the Chartered Accountant's report on international transactions) for filing with the Income Tax Return.
- 05
Assessment Support
If a transfer pricing audit is initiated, we draft responses to the Transfer Pricing Officer (TPO), provide additional documentation, and attend proceedings on your behalf.
Frequently Asked Questions
Which transactions are covered by Indian transfer pricing law?
All international transactions between associated enterprises, and specified domestic transactions between related parties exceeding ₹20 crore, are subject to transfer pricing provisions.
What methods are used for determining arm's length price?
The six prescribed methods are: Comparable Uncontrolled Price (CUP), Resale Price Method (RPM), Cost Plus Method (CPM), Profit Split Method (PSM), Transactional Net Margin Method (TNMM), and Other Method. TNMM is the most commonly used in practice.
What is Form 3CEB and who certifies it?
Form 3CEB is an accountant's report on international transactions, certifying that the aggregate value of transactions and the arm's length price determination are accurate. It must be certified by a Chartered Accountant and filed before the due date of the ITR.
What is the due date for filing Form 3CEB?
For assessment years where TP provisions apply, the due date is 31st October of the assessment year (or as extended by CBDT).
What is an Advance Pricing Agreement (APA)?
An APA is a binding agreement between a taxpayer and the CBDT specifying the transfer pricing methodology for future international transactions, providing certainty for up to 5 prospective years (and potentially 4 rollback years). We advise on APA eligibility and assist with the filing.