Dear Expert,
Can anybody explain, what is the meaning of "domestic transaction" in Transfer pricing return (3CEB).
Thanking you,
Domestic Transaction in Transfer pricing
Replies (1)
| Yes, domestic transactions are covered under Transfer Pricing in India under Specified Domestic Transactions (SDT). Here is the complete picture: 1. International Transfer Pricing (Section 92): Applies to transactions between associated enterprises where at least one party is a non-resident. This is the classic TP regime. 2. Specified Domestic Transactions (Section 92BA): From AY 2013-14, domestic transactions between related parties (where both are resident) are also subject to TP provisions if the aggregate value exceeds Rs. 20 crore in a financial year. Budget 2017 raised this threshold from Rs. 5 crore to Rs. 20 crore. 3. What Constitutes SDT: - Transactions between two entities where one entity has more than 80% deduction under Section 80-IA, 80-IB, 80-IC etc. (tax holiday) and the other does not - Payment to related parties covered under Section 40A(2) - Transactions under Section 80-IA(8) or 80-IA(10) 4. Compliance Requirements: If SDT threshold is crossed: - Maintain Transfer Pricing documentation (Section 92D) - Get TP study/report prepared - File Form 3CEB (Report from CA under Section 92E) before filing ITR - Due date: Same as ITR due date for companies/entities liable for audit 5. Arm's Length Price Methods: CUP, RPM, Cost Plus, TNMM, Profit Split — same methods apply for SDT as for international TP. 6. Penalty: If SDT is not reported or price is not at arm's length, penalty of 2% of transaction value under Section 271AA applies. |
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