Ease Of Doing Business: India Amends Transfer Pricing Rules

As part of efforts to improve its ranking on 'Ease of Doing Business' and in line with the promise made by Finance Minister Arun Jaitley in his Budget speech, the Indian government on Tuesday notified amendments to the transfer pricing rules to incorporate a "range concept" and use of multi-year data in line with the international best practices. The amended regime will be applicable for computation of arms. The amended rules would provide clarity in determination of price in transfer pricing cases and reduce disputes on transfer pricing (TP) issues. The use of multiple-year data would average out any variations in a particular year and add value to the transfer pricing analysis. The range concept will be applicable in certain cases for determining the price and will begin with the 35th percentile and end with the 65th percentile of the comparable prices. Transaction price shown by the taxpayers falling within the range will be accepted and no adjustment will be made. The amended regime will be applicable for computation of Arm's Length Price (ALP) of international transactions and specified domestic transactions undertaken on or after 1/04/2014. The news rules are designed to provide stability in the direct tax regime. The notification is available on the website of the Department incometaxindia.gov.in.

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