Transfer price - reg.....

Dear All,

I am working in a 100% EOU Software company established in Hyderabad, this is 100% subsidiary to the parent company (US). Our employees will work directly to the parent company clients, currently we are following cost plus method (one of transfer price method) to raise invoices to parent company every month.

Example:

1.       Salary expenses               :               Rs. 800

2.       Operational expense     :               Rs. 100

3.       Depreciation                      :               Rs. 100

Total Expenses                  :               Rs. 1000

Add: 20% mark-up on cost           :               Rs. 200

Invoice Price                      :               Rs. 1200

In the above case we are adding 20% profit to the cost and we are paying income tax on the profit, but originally parent company incurring losses and here we are paying taxes to the government, this is extra burden to the company overall.

So is there any best transfer price method to avoid tax payment as well as to arrive exact profitability of the company.

Dear all, please suggest best transfer price method.

Thanks in advance for your best support.

Regards,

NKR