Transfer Pricing Audit & Due Date

The Transfer Pricing Regulations (TPR) were implemented in India by the Finance Act, 2001 by replacing the previous section 92 of the Income Tax Act (the “Act”) with new sections 92A to 92F and adopting pertinent rules 10A to 10E of the Income Tax Rules, 1962. The rules apply to pertinent international transactions started after April 1st, 2001.

The key legal provisions are listed below:

  • Every individual or organization who has participated in an overseas transaction is required by law to keep an up-to-date record of each transaction.
  • Any income the corporation receives through an international transaction must be valued at arm’s length. Depending on the nature and type of the transaction, the nature of the group or association engaged, or any other aspects of the transactions involved, there are many ways to determine the arm’s length price. The Central Board of Direct Taxes, also referred to as the “Board,” is responsible for introducing these procedures. Among them are the transactional net margin approach, the Cost Plus method, the similar unregulated pricing method, and the resale price method.
  • When two or more reasonable prices are posited for a certain transaction, the arm’s length price is determined by averaging the prices.
  • Under the supervision of a Chartered Accountant, the individual or group involved in an overseas transaction should submit a Form 3CEB report detailing the transaction at the end of each financial year. Prior to filing his income tax return for the same time, he must file this form.
  • The organization or individual who violates these guidelines is responsible for paying the fines issued by the Board.
The Transfer Pricing Audit due date is 30th Nov,2022 for the AY 2022-2023. The corporation generally completes Form 3CD under Sections 92A to 92F of the Income Tax Act In lieu of Form 3CEB under the transfer pricing restrictions. These sections mostly deal with transfer pricing; if the business engages in any kind of overseas transaction with an associate enterprise, it must file Form 3 CEB. Basically, you must detail all domestic transactions with connected businesses as well as some specific overseas transactions in Form 3CEB. The submission of form 3CEB is subject to two prerequisites under the Transfer Pricing Regulation. Anyone who engaged in certain domestic or international transactions during the previous year must obtain a report from an accountant and submit it on or before the specified date in the prescribed form, duly signed and verified in the prescribed manner by said accountant, and containing any prescribed details. According to India’s transfer pricing legislation, a corporation must file Form 3CEB if it engages in any of the listed overseas transactions and certain listed domestic transactions with any associated enterprise.

Penalties for failing to submit Form 3-CEB:

  • On Failing to submit a Form 3CEB report A 100,000 INR minimum fine may be levied.
  • A penalty equal to 2% of the transaction’s value may be applied if you fail to provide information or documentation relevant to foreign transactions or certain domestic transactions under section 92D.
  • A penalty equal to 2% of the transaction’s value may be applied if you fail to keep and maintain information and documents, neglect to report, or provide false information.

 Steps for Ensuring Transfer Pricing Readiness:

  1. Perform a Self-Assessment.
  2. Comply with local regulations.
  3. Put your best foot forward.
  4. Make sure intercompany agreements are prepared accurately.
  5. Be consistent
  6. Offer supporting information for backup.
  7. Pay special attention to intangible property (IP) transfers.

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