An Indian subsidiary paying management fee to its Singaporean parent, and an Indian exporter invoicing its own group company located in Dubai, have the same problem to solve sitting in the shoes of the tax officer – would two unrelated companies have agreed to this price? This single question is the core of transfer pricing in India, and this rule concerns any price, charge, interest rate or other terms of transactions fixed between associated parties across the border.

We offer TP services in India to foreign groups operating in India and Indian businesses with overseas affiliates. The scope of services includes TP study, benchmarking analysis, accountant's report, advance pricing agreements and defence before the Transfer Pricing Officer (TPO). The goal is quite simple – solve the problem of pricing with evidence on the record before the officer raises the question.

In other words, if two associated businesses enter into any type of transaction across the border, in India, this transaction should have arm's length price. Otherwise, the tax officer can substitute the arm's length price, increase the taxable income of your business, and apply interest and penalties. Transfer pricing is the practice of solving the issue in advance of that.

Understanding Transfer Pricing in India

Transfer pricing is not an independent tax. This is the rule regulating the method of computation of income between parties to the transaction where the parties are related through ownership, control or common management. India applies transfer pricing to international transactions between associated enterprises and certain domestic transactions above the prescribed value threshold, known as specified domestic transactions.

From 1 April 2026, the relevant rules are included in Sections 161 to 173 of the Income-tax Act, 2025 as opposed to Sections 92 to 92F of the 1961 Act. The arm's length principle stays the same, and financial year 2025-26 and prior years are examined according to the previous legislation. In case if some assessments or appeals for the older years remain pending, businesses are expected to deal with both sets of the legislation. If you are interested in a more detailed comparison of the two, please see our article Income Tax Act, 1961 vs Income Tax Bill, 2025.

The difference between transfer pricing firms in India lies in their benchmarking experience and litigation track record. While a good report that never met the TPO tends to be different from the one compiled by the people with practical experience of defending similar position before the officer, the Dispute Resolution Panel or even the Tribunal.

At R Pareva & Company, the transfer pricing services have grown from the cross-border pricing issues that our international tax advisory clients regularly asked about: what price the subsidiary should charge, what the parent company could recover, and how to prove it. The treaty and foreign exchange considerations are taken into account along with the transfer pricing because otherwise the transaction will be failed, despite being perfectly good in one respect or the other. See our article on Cross-border tax planning of businesses entering India for a broader understanding.

Challenges in Transfer Pricing in India

Usually, multinational groups, Indian subsidiaries of foreign companies, and businesses with overseas affiliates face such challenges as:

  • Intra-group Services and Management Fees: Head Office charges, shared services costs and support fees are some of the most questionable items. The first question of the tax officer is whether a service had been actually provided and whether an independent party would have paid for it.
  • Royalties and Technology Payments: Payments for brands, software or any intellectual property to the foreign parent company are often looked at twice – not only in relation to the rate, but also in terms of benefit received in India.
  • Intercompany Loans and Guarantees: Interest rates for the group loans and guarantee fee (or its absence) tend to remain undocumented until audit starts questioning them. Any foreign investment into India brings about its own foreign exchange issues under FC-GPR, FC-TRS and FLA.
  • Lack of Suitable Comparables: Benchmarking sample comprising companies with a different risk profile or functional mix may be dismissed, leading to the adjustment.
  • Tight Compliance Schedule: Accountant's report, master file and country-by-country reporting each have their own schedule, and missing the one in the process of preparing the other is a regular mistake.
  • Exposure to Penalties and Secondary Adjustment: In addition to the tax itself, the penalties can be imposed based on the transaction value, and the adjustment may result in the money to be repatriated to India, which will be another foreign exchange issue under FEMA.
  • Transition to the New Act: From financial year 2026-27, the accountant's report form changes from 3CEB to 48.
FEMA and RBI Compliance in India

RPC Offerings in Transfer Pricing

The quality of pricing position is only as good as its documentation. In India, the documentation is compiled at the moment of transaction and not rebuilt under the pressure of deadline after a notice. Our transfer pricing documentation services include:

  • Local File and TP Study: Comprehensive report comprising group profile, description of transactions, functions performed, assets used and risks borne by the parties to the transaction, as well as arguments in favour of chosen method.
  • Master File and Country-by-Country Reporting: Group-level documentation and reporting for multinational groups, compiled with the information from the parent company and consistent with the one filed abroad.
  • Accountant's Report: Coordination of annual certification procedure with the filing of the accountant's report on Form 3CEB for financial year 2025-26 and Form 48 from tax year 2026-27 and onwards, ensuring consistency with TP study and income tax return. The numbers also play important role in the audit of foreign companies in India and should be consistent there.
  • Books and Intercompany Reconciliation: Consistent intercompany books are the key for all the following steps, and our accounting outsourcing services will ensure that.

Benchmarking is the step where the arm's length price is being verified against market data. This includes:

  • Functions, Asset and Risk (FAR) Analysis: Determination of who performs what function, who possesses what asset and who bears what risk, because this defines the appropriate method and the appropriate comparables.
  • Method Selection: Determination of the most suitable method among prescribed methods, such as Comparable Uncontrolled Price (CUP), Resale Price Method, Cost Plus Method, Profit Split Method or Transactional Net Margin Method (TNMM), and explanation of the rationale for rejecting the alternatives.
  • Comparable Search and Adjustment: Compilation of a comparable independent companies' sample, application of the range and/or working capital/risk adjustment, as well as documentation of the process.

Many disputes start with the policies that have never been properly documented. We help our clients compile it before the very first invoice is issued. This includes:

  • Service, Royalty and Cost Sharing Agreements: Agreements and pricing mechanics for management fees, licensing and other intercompany services, including the benefit of receiving them.
  • Internal Financing: Documentation of the interest rates and guarantor fee of loans, external commercial borrowings and foreign investments in compliance with FEMA and RBI.
  • Treaty and Withholding Alignment: Ensuring that the pricing policy is not contradicted by the provisions of DTAA relief and Form 41 requirements for payments to non-residents. In case if the beneficiary is a non-resident group company, low deduction certificate prevents over-deducting the taxes.
  • GST Alignment: There are special aspects of intercompany transactions with GST implications that are verified by our GST compliance specialists along with the income tax issues.
  • Business Model Alignment: Verification whether Indian entity is characterised correctly as contract service provider, limited risk distributor or operation with wider functions.

Not everyone wants to justify his or her pricing every year. India has tools of obtaining certainty in advance:

  • Safe Harbour Assessment: Checking whether the transaction meets the prescribed safe harbour conditions, and whether accepting the fixed rate or margin is more economical solution for you, than carrying out a benchmarking analysis.
  • Advance Pricing Agreement (APA): Preparing and negotiating of the unilateral, bilateral or multilateral APA, as well as its rollback, to have the agreement on pricing for several years, instead of arguing every year.
  • Block Transfer Pricing Assessment: Evaluation whether eligible recurring international transactions can be put into the block assessment regime, as well as preparation of required certificates and forms.

The referral to TPO is a formal procedure, and you have to act accordingly. Our assistance includes the whole way from the first notice to the final appeal:

  • TPO Audit Representation: Response to questionnaires, submission of TP study and comparables, as well as participation in hearings before the TPO.
  • Draft Order, DRP and Appeals: Filing objections before the Dispute Resolution Panel, appeals before the Commissioner (Appeals) and representing before the Income Tax Appellate Tribunal, in coordination with our tax litigation team.
  • Mutual Agreement Procedure (MAP): Relief from double taxation caused by the transfer pricing adjustment through competent authorities under the relevant tax treaty. See our article on challenges of tax litigation for non-residents, and our guide on Form 67.
  • Secondary Adjustment and Repatriation: Assistance in managing the consequences of the adjustment, when the excess amount of money is to be repatriated, including the relevant steps of repatriation and reporting.

Transfer pricing is not limited to international transactions. Our assistance in this area includes:

  • Specified Domestic Transactions: Documentation and reporting of related party dealings among Indian entities whose aggregate value exceeds the prescribed limit.
  • Business Restructuring: Pricing and documentation of the transfer of functions, assets and risks within the group, as well as assistance in merger and acquisition of entities with transfer pricing aspects.
  • New Entity Setup: Setting up the intercompany pricing framework at the stage of registering Indian subsidiary by the foreign company to make the model justified from the first year of operations. See our article on Checklist for Setting up a Foreign Subsidiary in India for the general guidance on registration of foreign companies in India.

Who We Support

  1. 01 Indian Subsidiaries of Foreign Groups Services, royalties and cost recharges to the parent, with the comprehensive TP study.
  2. 02 Indian Groups with Overseas Affiliates Outbound investments, exports to related parties and foreign financing.
  3. 03 Foreign Companies with a Presence in India Profit allocation and pricing of transactions with Indian branch, liaison office or permanent establishment.
  4. 04 Captive Service Centres and Exporters Contract service and export models with special focus on the safe harbour and margin support. Exports to related overseas parties should also meet the RBI FEMA export-import regulations.
  5. 05 Family Businesses and Domestic Groups Related-party dealings among group companies exceeding domestic reporting limit.

    Our Structured Approach to Transfer Pricing

  • Step 1 – Mapping of Related-Party Transactions: We identify all transactions made with associated enterprises and verify which of them fall under the relevant legislation.
  • Step 2 – Functional and Risk Analysis: We record the functions, assets and risks performed/borne by all the parties to the transaction.
  • Step 3 – Method Selection and Benchmarking: We choose the method and build the benchmarking set.
  • Step 4 – Documentation and Reporting: We compile the TP study and coordinate the accountant's report and group-level filings.
  • Step 5 – Policy Alignment: We align contracts, invoices and year-end adjustments with the policy documented.
  • Step 6 – Audit and Dispute Resolution: We represent the client before the tax authorities, and, in case of necessity, before the Tribunal and/or competent authorities.

When to seek Transfer Pricing Advice?

Why Choose R Pareva & Company for Transfer Pricing Services?

Most of the transfer pricing issues are not calculation mistakes. They are differences between the contract terms, invoices and assumptions in the TP study. To eliminate them in advance is the major goal of our work.

What makes us different?

R Pareva & Company works with foreign groups and Indian businesses on transfer pricing from the first note to the final appeal.

Get in Touch

Need transfer pricing consultants in Delhi? Contact R Pareva & Company at +91-9711323533 or info@rpareva.com.

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