Domestic Transfer Pricing
Domestic Transfer Pricing for Financial Year 2022-23 aims to ensure fair pricing of transactions between related parties within India to prevent profit shifting and maintain tax compliance.
Specified Domestic Transactions
The rules and regulations of Specified Domestic Transactions in India are governed by Section 92BA of the Income Tax Act, 1961, and related provisions. The key points include:
Applicability
Specified Domestic Transactions apply to transactions between related parties, where both parties are residents of India.
Arm’s Length Principle
The transactions should be conducted at arm’s length, meaning the prices or consideration should be similar to that of transactions between unrelated parties under similar circumstances.
Threshold Limit
The aggregate value of Specified Domestic Transactions during the financial year should exceed the prescribed threshold to come under scrutiny.
Maintaining Documentation
Taxpayers are required to maintain detailed documentation, including transfer pricing study reports, supporting the arm’s length pricing of these transactions.
Transfer Pricing Methods
Taxpayers must use appropriate transfer pricing methods, such as Comparable Uncontrolled Price (CUP), Resale Price Method (RPM), or Transactional Net Margin Method (TNMM), to demonstrate compliance with arm’s length pricing.
Advance Pricing Agreement (APA)
Taxpayers have the option to enter into APA with the tax authorities to determine the arm’s length price in advance for specified domestic transactions.
Penalties
Non-compliance or failure to maintain required documentation may lead to penalties and adjustments by tax authorities.
Audit and Assessment
Specified Domestic Transactions are subject to rigorous audit and assessment by the tax authorities to ensure compliance with transfer pricing regulations.
Safe Harbour Rules
Safe Harbour provisions are available for certain transactions where the taxpayer can choose to follow prescribed margins to avoid transfer pricing disputes.
Compliance Deadlines
Taxpayers must file appropriate documentation and Form 3CEB reporting specified domestic transactions by the specified deadlines.
Segregation of Transactions
The transactions should be segregated and disclosed separately in the financial statements.
Compliance Deadlines
Taxpayers must file appropriate documentation and Form 3CEB reporting specified domestic transactions by the specified deadlines.
Segregation of Transactions
The transactions should be segregated and disclosed separately in the financial statements.
It is essential for taxpayers engaging in specified domestic transactions to comply with these regulations, maintain comprehensive documentation, and ensure adherence to the arm’s length principle to avoid potential tax disputes and penalties.