The Simplest Understanding To Transfer Pricing Compliance In India

This article is intended to provide a simple understanding of transfer pricing (TP) provisions in India to those who have not yet been exposed to TP compliance in India. This may be due to various reasons such as meeting the threshold of international transactions with group companies for the first time, setting up new business in India to act as a captive service/goods provider to group companies, etc. Readers who have been complying with TP requirements in India would already be aware of most of the contents covered in this article.

Before we discuss the methods, forms, and documentation that are applicable because of TP, let's first understand why TP provisions were enacted in India. In the year 2001, TP provisions were enacted in the provisions of the Income Tax Act, 1961 ('the Act') through Chapter X i.e., 'Special Provisions relating to avoidance of tax'. The said provisions were enacted to ensure that the transactions (i.e., international