Core concepts
- 01International transaction between associated enterprises must be at arm's length price (ALP).
- 02Methods: CUP, RPM, CPM, PSM, TNMM, Other Method (Rule 10AB).
- 03Specified Domestic Transactions (SDT) covered if exceeding ₹20 cr threshold.
- 04TP Documentation: Master File (10DA), Local File, CbC Reporting (10DB) — three-tier.
- 05Penalty: 2% of value (failure to maintain docs), 50%-200% of tax (concealment).
Flowchart
Transfer Pricing Methods | CUP -- Comparable Uncontrolled Price RPM -- Resale Price Method CPM -- Cost Plus PSM -- Profit Split TNMM -- Transactional Net Margin Other -- Rule 10AB | Most Appropriate Method (MAM) chosen
Exam-critical pointers
- ⭐Associated Enterprise (Sec 92A): 26%+ direct/indirect equity OR control / influence.
- ⭐Advance Pricing Agreement (APA) — Unilateral, Bilateral, Multilateral; 5-year prospective + 4-year rollback.
- ⭐Safe Harbour Rules (Rule 10TA-TG) for specified industries (IT, ITES, KPO, contract R&D).
- ⭐Form 3CEB (CA audit report) compulsory if international/SDT entered into.
Make it click