Transfer Pricing Update India

Amendment by Union Budget 2021-22 passed by the Parliament in March 2021

Reduction of time limit for completion of assessment

The time limit for completion of assessment proceedings has been reduced by 3 months. The corporate tax assessment (if the matter is referred for Transfer Pricing assessment) will now be made within 33 months from the end of the fiscal year and the Transfer Pricing assessment will be completed 2 months before the completion of the corporate tax assessment. If no reference is made for the Transfer Pricing assessment, then the time limit for completion of the corporate tax assessment will be 21 months from the end of the fiscal year. This amendment is effective as of 01 April 2021.

Rationalisation of provision of Minimum Alternate Tax

Where there is an increase in the book profit of the taxpayer for a financial year due to income of past year(s) pursuant to secondary adjustment or APA entered by the taxpayer, the taxpayer can make an application to the Assessing Officer for re-computing the book profit and tax payable for the past year(s) and the Assessing Officer would act on the said application within 4 years. This amendment is effective as of 01 April 2021.

Updates on Master File & CbCR regulations

The Central Board of Direct Taxes has amended the Income Tax Rules relating to Master File & CbCR with effect as of 01 April 2021.

Master File

It is now clarified that the filing of Master File (in Form 3CEAA) can be carried out by any one of the constituent entities of an international group. Earlier, the regulations required that where there are more than one constituent entities resident in India, the Master File was to be filed by any one of the constituent entities resident in India, designated by the international group. However, there was no clarity whether such an option could be exercised if there existed one or more non-resident constituent entities in India. Now it is provided that, where both resident and non-resident constituent entities exist in India, the Master File compliance can be undertaken by any one of the constituent entities (resident or non-resident).

CbCR

The consolidated group revenue threshold for applicability of CbCR has been increased to factor the current exchange rates whilst ensuring alignment with the OECD-prescribed threshold of EUR 750 million. Therefore, CbCR would now be applicable for international groups having consolidated group revenue of INR 6400 crores instead of INR 5500 crores earlier.

Read the WTS Global Transfer Pricing Newsletter here.