Indian Transfer Pricing regulations play a crucial role in ensuring that transactions between related entities adhere to the arm’s length principle, thereby preventing profit shifting and maintaining the integrity of tax bases. For businesses involved in international or specified domestic transactions, staying compliant with these regulations is vital to avoid hefty penalties. This guide provides a detailed overview of the key compliance requirements, applicable deadlines, and potential penalties for non-compliance for the financial year 2023-24.
Key Transfer Pricing Compliance Requirements
1. Transfer Pricing Study (TP Study)
- Applicability: Mandatory for entities engaging in international transactions exceeding INR 1 crore or specified domestic transactions exceeding INR 20 crores. This includes transactions with entities claiming special tax exemptions or deductions under sections 80IA, 80IB, 10AA, or concessional tax rates under section 115BAB.
- Due Date: October 31, 2024 (one month prior to the tax return filing due date).
- Penalty for Non-compliance: 2% of the value of international transactions or specified domestic transactions.
2. Form No. 3CEB Report
- Applicability: Required for entities undertaking international transactions with foreign Associated Enterprises (AEs) or specified domestic transactions with Indian AEs, particularly when one of the parties is claiming tax exemptions or concessional tax rates.
- Due Date: October 31, 2024.
- Penalty for Non-compliance: INR 1,00,000.
3. Master File (Form No. 3CEAA)
- Part A: Applicable to all Multinational Enterprises (MNEs) engaging in international transactions during the financial year, regardless of the threshold.
- Part B: Required if the consolidated group revenue exceeds INR 500 crores, and the aggregate value of international transactions exceeds INR 50 crores, or the intangible property-related transactions exceed INR 10 crores.
- Due Date: November 30, 2024 (Part A), October 31, 2024 (Part B and Form No. 3CEAB).
- Penalty for Non-compliance: INR 5,00,000 for non-furnishing of information and documentation.
4. Country-by-Country Reporting (CbCR) (Form No. 3CEAD)
- Applicability: For entities where the consolidated group revenue exceeds INR 6,400 crores in the preceding accounting year.
- Due Date: 12 months from the end of the group’s accounting year; December 31, 2024, if the group’s accounting year ends on December 31, 2023.
- Penalty for Non-compliance: Ranges from INR 5,000 to INR 50,000 per day depending on the duration of the delay.
Important Tax Compliance Deadlines for Transfer Pricing
- Income Tax Return (ITR): November 30, 2024.
- Form No. 3CA/3CD – Tax Audit Report u/s 44AB: October 31, 2024.
- Form No. 29B – Report u/s 115JB: October 31, 2024.
- Form No. 10ID & 10IC – Concessional Tax Rate Applications: Before filing ITR due by November 30, 2024.
- Form No. 56F & 56FF – Tax Exemption Reports: October 31, 2024.
- Form No. 10CCB & 10CCBBA – Audit Reports for Tax Holiday Deductions: October 31, 2024.
- Form No. 67 – Statement for Foreign Tax Credit (FTC): March 31, 2025.
Conclusion
Ensuring compliance with Indian Transfer Pricing regulations requires meticulous attention to the applicable thresholds, deadlines, and documentation requirements. Non-compliance can result in substantial penalties, underscoring the importance of timely and accurate reporting. By staying informed and proactive, businesses can effectively manage their transfer pricing obligations and avoid potential pitfalls.