What's involved
Transfer pricing starts with identifying every transaction with an associated enterprise — sales, purchases, services, royalties, loans, guarantees, cost allocations. Each is benchmarked against comparable transactions between unrelated parties, using the most appropriate method.
The Chartered Accountant's report certifies the transactions and the arm's-length price. It's filed before the return, and the return itself has a later due date for taxpayers who file the report.
Documents required
- Group structure and details of associated enterprises.
- Intercompany agreements and invoices.
- Financial statements and segmental data.
- Functions performed, assets used and risks assumed by each party.
- Previous years' transfer pricing documentation, if any.
How we handle it
Map the transactions
Every transaction with associated enterprises identified and classified.
Functional analysis
Who does what, owns what, and bears what risk.
Benchmark
The most appropriate method selected and comparables identified.
Document
The transfer pricing study prepared and kept.
Report
The accountant's report filed before the due date.
Transactions commonly covered
| Transaction | Typical question |
|---|---|
| Purchase or sale of goods | Is the price in line with comparable independent transactions? |
| Software development or IT-enabled services to the parent | Is the mark-up on cost at arm's length? |
| Royalty and technical fees | Is the rate and the benefit supported? |
| Intercompany loans and guarantees | Is the interest or fee at arm's length? |
| Cost allocations and reimbursements | Are the costs real, allocated fairly, and beneficial? |
Pricing methods
- Comparable uncontrolled price method.
- Resale price method.
- Cost plus method.
- Profit split method.
- Transactional net margin method — the most commonly used in India.
- Other methods as prescribed.
Practical notes from our engagements
- Reimbursements treated as outside transfer pricing. Cost reimbursements and allocations with group companies are international transactions too.
- Intercompany loans without interest. Interest-free loans to or from a foreign group company are tested for arm's-length interest.
- Documentation prepared only when a notice arrives. Contemporaneous documentation is required; it can't be built after the fact.
How we handle transfer pricing
We map transactions early in the year, agree the pricing policy with you, prepare the documentation and file the accountant's report on time — coordinated with the tax audit and the return.
Related services
Frequently asked questions
What is the arm's-length price?
The price that would be agreed between unrelated parties in comparable circumstances.
What replaced Form 3CEB?
Form 48 under the Income-tax Rules, 2026, from tax year 2026-27. Form 3CEB still applies for AY 2026-27.
When is the transfer pricing report due?
One month before the return due date — 31 October 2026 for AY 2026-27, with the return due by 30 November 2026.
Does transfer pricing apply to domestic transactions?
To specified domestic transactions above the prescribed threshold.
What happens if documentation isn't maintained?
Penalties can apply for failing to keep or furnish documentation and for failing to file the report, in addition to adjustments on assessment.
Which transfer pricing method is most common in India?
The transactional net margin method, which compares net profit margins with comparable companies.
Are advance pricing agreements available?
Yes. An advance pricing agreement with the tax department can fix the pricing method for future years.