Documentation prepared in time
A study written before the year closes is worth more in an assessment than a better one written afterwards.
Tax & Regulatory
International Tax & Transfer Pricing
Transfer pricing studies, the accountant's report, master file and country-by-country obligations, withholding on cross-border payments, treaty relief and residence positions for Indian companies inside foreign groups and for inbound investors.
Overview
An Indian subsidiary inside a foreign group carries two tax positions that are examined more closely than anything else on its return: the price it charges its own group, and the tax it withholds when it pays them.
Both are documentation problems before they are pricing problems. An officer does not begin with the margin. He begins with what evidence exists that a service was received, and whether the functional analysis describes the business or a template. A withholding dispute rarely turns on the rate either. It turns on characterisation, and on whether a tax residency certificate was held at the time of payment rather than obtained afterwards.
The framework itself has been renumbered. Transfer pricing now runs from Section 161 to Section 173, the accountant’s report is filed in Form 48, and the master file and country-by-country forms carry new numbers under the Income-tax Rules 2026.
Scope of engagement
- Identification and mapping of associated enterprises and international transactions under Sections 162 and 163, including transactions a group treats as internal and does not report.
- Functional analysis covering the functions performed, assets employed and risks assumed, written from interviews with the people doing the work rather than from the group’s global policy document.
- Benchmarking and selection of the most appropriate method under Section 165, with the search strategy, rejection reasons and screening criteria recorded so the study can be reproduced.
- Contemporaneous documentation under Section 171, maintained to the standard the rules require rather than assembled when a notice arrives.
- The accountant’s report in Form 48, replacing Form 3CEB, covering every reportable international transaction and specified domestic transaction under Section 164.
- Master file preparation and filing with the associated designation intimation, and country-by-country notification and report filing, or the intimation identifying the group’s reporting entity where that obligation sits overseas.
- Safe harbour evaluation under Section 167, modelled against a benchmarking outcome before the option is exercised.
- Advance pricing agreement support under Sections 168 and 169, including the pre-filing position and the annual compliance report, and secondary adjustment computation under Section 170 where a primary adjustment is not repatriated.
- Cross-border withholding: characterisation of the payment, treaty testing, the remittance certificate and declaration, and the exempt categories that do not require them.
- Treaty relief under Section 159, including tax residency certificates, the supplementary information in Form 41, permanent establishment risk, and beneficial ownership.
- Residence and nexus positions: place of effective management for group companies, and significant economic presence for non-residents dealing with Indian customers without a physical presence.
| Method | Where it usually applies |
|---|---|
| Comparable uncontrolled price | An identical or closely similar transaction with an unrelated party, internal or external. Strongest when available, rarely available. |
| Resale price | Distribution with no significant value added before onward sale. |
| Cost plus | Contract manufacturing and contract service provision on a cost-recharge basis. |
| Profit split | Integrated operations, or transactions involving unique intangibles contributed by both sides. |
| Transactional net margin | The default for captive service and support entities, tested on an appropriate profit level indicator. |
A sixth method may be applied where the prescribed conditions are met and none of the above gives a reliable result. The notified tolerance range applies where its conditions are satisfied.
Deliverables
- A transfer pricing study containing the functional analysis, the economic analysis, the search documentation and the conclusion on arm’s length pricing.
- The accountant’s report in Form 48, prepared for signature. Work requiring a registered signatory is performed and signed by a professional holding the relevant registration.
- A master file pack and, where applicable, the country-by-country notification or report.
- An intercompany agreement review noting where the written terms and the conduct of the parties differ, which is the first thing an officer tests.
- A withholding matrix listing each recurring cross-border payment type, its characterisation, the domestic and treaty rate, the documents required before remittance, and who holds them.
- Written opinions on individual remittances, and the accompanying declaration and certificate where the payment requires them.
- A permanent establishment and place of effective management risk note, with the specific facts that create exposure identified.
- A benchmarking refresh schedule, so the study is updated before the year it covers.
Process
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Transaction mapping
Group structure, intercompany agreements, ledger extraction of related-party flows, and reconciliation to the notes in the accounts. Unreported transactions surface here.
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Functional interviews
Conversations with operations, engineering and sales, not the group tax team alone. An analysis that does not match how the business runs will not survive a first question.
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Method selection and benchmarking
The method is selected on the facts and the data available, then the search is run and documented. Rejection reasons are recorded at the time, because reconstructing them later is not credible.
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Documentation and filing
The study, the accountant’s report and the master file are assembled, reviewed against the record, and filed within the statutory dates.
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Assessment support
Where a reference is made to the transfer pricing officer, we prepare the responses and the supporting evidence. A determination can now apply to similar transactions in the two following years, so what is conceded in one year travels forward.
Benefits
Agreements that match conduct
Written terms are reconciled to how the parties behave, closing the gap an officer looks for first.
Withholding decided before payment
Characterisation and treaty documents are settled ahead of the remittance, not reconstructed years later.
Positions that hold across years
A determination can now travel forward, so a position is prepared as though it will be tested three times.
Industries served
Technology and software, where the work is captive development and support centres, cost-plus recharges, the ownership of intangibles created in India, and withholding on software and cloud payments. Manufacturing, where it is contract manufacturing margins, royalty and technical service fees to a parent, and imported component pricing. Financial services, where it is intra-group funding, guarantee fees, and the permanent establishment question raised by staff seconded into India. We also act for healthcare, retail and e-commerce, real estate and infrastructure, and Indian companies making their first outbound acquisition.
Typical timeline
- Scoping call and document list: next business day after enquiry.
- Transaction mapping and functional interviews: 2 to 3 weeks.
- Benchmarking, analysis and draft study: a further 4 to 6 weeks, depending on the number of tested transactions and the availability of comparable data.
- Accountant’s report, master file and country-by-country filings: prepared to be complete at least 15 business days before the statutory date.
- Withholding opinion on a defined payment: 5 to 10 business days.
- Advance pricing agreement work runs to the authority’s timetable, measured in years.
Engagement model
Contracted per entity and per financial year. A study is a fixed fee set by the number of tested transactions and whether a fresh benchmarking search is required or an existing one can be refreshed. Withholding opinions are priced individually or as an annual retainer covering a defined set of recurring payment types. Master file and country-by-country work is quoted separately because the obligation depends on the group, not on the Indian entity.
Delivery is virtual. Functional interviews are conducted by video and written up for your review. We work directly with overseas group finance teams where you ask us to, within Indian business hours unless the engagement letter agrees another window.
What is not included
- Tax advice on the law of any country other than India. Where an overseas position is needed, we work alongside your adviser there; we do not opine on their statute.
- Purchase of commercial comparable databases in your name. Search costs are stated separately in the engagement letter.
- Mutual agreement procedure applications and negotiation between competent authorities.
- Advocacy before the Appellate Tribunal, the High Court or the Supreme Court. Drafting, evidence and briefing support are available under our litigation support engagement.
- Valuation of shares or intangibles for regulatory purposes. That is a separate engagement and a separate signatory.
- Foreign exchange management approvals, overseas direct investment filings and annual performance reports.
- Backdating. We will not sign a study as contemporaneous if it was not prepared contemporaneously, and we will say so in the report.
- Structuring whose only purpose is to reduce tax without a commercial rationale that can be stated in a sentence.
Frequently asked questions
Yes. The obligation attaches to the existence of an international transaction with an associated enterprise, not to its size or complexity, and a services recharge is among the most frequently adjusted categories. The recurring challenge is not the mark-up but the benefit test: what was actually received, by whom, and what evidence exists that it was needed. Documentation prepared after the fact rarely satisfies it.
It depends on whether the margin required is one you can live with. Safe harbour removes the audit risk on a covered transaction by accepting a prescribed return, and the eligibility threshold now extends to ₹300 crore of covered transactions. The cost is that the prescribed margin is deliberately set above what a benchmarking study would usually support, and the option is exercised for a defined period. We model both routes before you elect.
Not automatically. The question is whether the payment is chargeable to tax in India at all, which turns on characterisation. Standardised hosting on shared infrastructure is generally a service rather than a right to use equipment or a licence of a process, but the answer moves with the contract. Withholding on cross-border payments now sits in the consolidated deduction provision, and the remittance is reported in Form 145 with the accountant's certificate in Form 146 where required.
Treaty relief cannot be applied without one. A tax residency certificate issued by the other country is a statutory precondition, and the additional information in Form 41 supplements it rather than substitutes for it. Where the certificate is not forthcoming, the payment is withheld at the domestic rate, including the higher rate that applies where no permanent account number is furnished. The supplier can claim the difference by filing a return in India.
No. The levy on e-commerce supply and services was withdrawn in August 2024, and the remaining levy on online advertising payments was withdrawn from April 2025. Payments that once fell within it are now tested under ordinary chargeability, treaty protection and the withholding provisions, which is a different analysis rather than an absence of one. Assessments and refunds for earlier periods are still working through the system.
Part A is required from every constituent entity of an international group irrespective of size. Part B applies only where the group's consolidated revenue exceeds ₹500 crore and the Indian entity's international transactions exceed ₹50 crore, or ₹10 crore where they involve intangible property. Country-by-country reporting is a separate and much higher threshold, applying to groups whose consolidated revenue exceeds ₹6,400 crore.
Neither follows automatically, and the risk usually runs the other way. A foreign company is resident in India if its place of effective management is here, which is decided on where key management and commercial decisions are in substance made rather than where board meetings are minuted. Where an Indian team is setting group strategy and the overseas board is ratifying it, the exposure is real. Board papers and delegation records matter more than the venue.
Related services
Direct Tax Advisory & Litigation Support
Where a transfer pricing adjustment has been made and the appeal drafting and evidence work begins.
Transaction Advisory Services
Where an inbound investment or a group reorganisation has to be structured before the tax positions are set.
Business Valuation Services
Where an intangible, a share transfer or an intra-group loan needs an independent valuation to support its price.