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  3. Domestic Transfer Pricing Income Tax Act 1961

Domestic Transfer Pricing Income Tax Act 1961

The third part of Article 92BA refers to any transfer of goods or services within the meaning of subsection (8) of Article 80-IA. Article 80-IA (8) regulates the transfer of goods and services between units. The assessments for the 2012-2013 fiscal year would require the application of transfer pricing rules for domestic related party transactions. Below you will find an overview of the latest developments in national transfer pricing rules. The concept of transfer pricing was introduced into the Information Technology Act by the Finance Act 2001 to ensure that a reasonable amount of income is taxed in India and to curb the practice of tax evasion. In his budget speech for 2001, the honourable Member responsible for finance stated the following: the provisions currently in force granting profit-based tax holiday deductions, which are governed by Article 80a(6) and are therefore subject to national transfer pricing, are as follows: – For a transaction falling within the definition of a specified national transaction, the total value of all transactions specified in connection with various domestic transactions Section 92BA items are expected to exceed the threshold limit of INR 20 crores as of the 2016-17 valuation year. The specified threshold ensures that taxpayers who carry out minimum related party transactions are not burdened by transfer pricing requirements. The threshold also ensures that the compliance costs and administrative burdens of these provisions do not exceed the resulting benefits. The scope of paragraph 40A(2)(b) is very broad and includes persons who are related to the assessor in multiple relationships.

Therefore, the appraiser and the accounting officer should ensure that all relevant expenditure transactions with all specific persons, as referred to in point (b) of Article 40a(2), are carefully identified and included in the transfer pricing documentation and the accounting officer`s report. In order to ensure the completeness of that information, the accounting officer should obtain from the assessor a written statement indicating the list of persons referred to in point (b) of Article 40a(2) and the related expenditure operations. In this context, Article 92 of the Information Technology Act has been amended accordingly to provide that the adjustment for expenditure, interest, costs or revenues related to certain domestic transactions (for the sake of brevity “SZT”) is calculated taking into account the arm`s length principle. With respect to transfer pricing, the Safe Harbour Rules refer to legislation that reduces or eliminates taxpayers` liability when certain conditions are met, as it provides for circumstances in which a particular category of taxpayers may follow a prescribed set of rules under which transfer pricing is automatically accepted by tax authorities. India is committed to the BEPS project, including the implementation of Action 13. The Central Board for Direct Taxation (CBDT) has imposed multi-level transfer pricing documentation requirements, including rules for maintaining and providing the master file and cbCR in relation to an international group. .

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