Transfer Pricing in India: Compliance, Documentation & Audits
If your Indian company transacts with a foreign parent or group entity — buying goods, paying royalty, receiving services — transfer pricing (TP) rules apply, and India audits them closely.
The arm's length principle
Related-party transactions must be priced as if between independent parties. India accepts several methods to establish this:
- Comparable Uncontrolled Price (CUP)
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method (TNMM) — the most common
- Profit Split Method
Documentation requirements
- Local File: detailed analysis of related-party transactions and benchmarking
- Form 3CEB: an accountant's report certifying the transactions — mandatory above the threshold
- Master File & CbCR: for large multinational groups
Contemporaneous documentation
Prepare your benchmarking during the year, not after a notice arrives. Contemporaneous, well-supported documentation is your best defence in an audit.
Surviving a TP audit
Indian TP audits frequently challenge margins and royalty rates. A robust functional analysis, reliable comparables, and consistent group policy reduce the risk of adjustments and penalties.
Reducing uncertainty
An Advance Pricing Agreement (APA) locks in an accepted methodology for future years, giving certainty on high-value or recurring transactions.
Statura prepares your TP policy, documentation and Form 3CEB and supports you through audits.