Transfer Pricing Policy & Documentation (Domestic & International)

Overview

If your company has a foreign parent, a foreign subsidiary, or routinely bills a related overseas entity for services, you have probably been asked what transfer pricing actually requires of you. Transfer pricing is not a discretionary best practice; it is the requirement, under sections 92 to 92F of the Income-tax Act 1961 and Rules 10A to 10E of the Income-tax Rules 1962, that every transaction between associated enterprises (AEs) be priced as if the parties were unrelated. The obligation starts the moment an AE relationship exists — a Form 3CEB is due even for a single transaction with a non-resident AE — well before any of the higher thresholds below come into play.

Section 92A treats two enterprises as associated where one holds at least 26% of the other's voting power, among several other tests; section 92B then defines the international transaction that follows — sales, services, cost-sharing, financing or IP licensing between AEs where at least one party is a non-resident. A parallel category, the specified domestic transaction (SDT) under section 92BA, covers related-party dealings tied to profit-linked deductions, but only once their aggregate value crosses ₹20 crore in the year. Whichever route applies, the pricing is tested against one of six statutory methods — CUP, resale price, cost plus, profit split, TNMM, or the residual 'Other Method' under Rule 10AB — chosen to fit the transaction, not picked for a favourable number.

Documentation scales with value. Rule 10D's Local File — ownership structure, a functional analysis of both parties, comparables and the pricing method's working papers — becomes mandatory once aggregate international transactions exceed ₹1 crore in the year; it must exist by the time Form 3CEB is filed, though it is produced to the department only on demand. Larger groups carry two further layers: a Master File (Form 3CEAA) once group revenue exceeds ₹500 crore and the entity's own international transactions exceed ₹50 crore, and a Country-by-Country Report (Form 3CEAD) once the parent's consolidated revenue exceeds ₹6,400 crore. A group wanting multi-year certainty instead of an annual defence can apply for an Advance Pricing Agreement, fixing the method for up to five years.

A transfer pricing policy and a transfer pricing agreement solve different problems, and it is worth being precise about which one you need. The policy is the internal document setting out the group's chosen method and pricing rationale — the cost-plus percentage for a captive services arrangement, the royalty rate for IP use — decided before money moves. The transfer pricing agreement is the signed contract that implements it; the Local File and Form 3CEB are the annual evidence that the agreement's pricing actually held up. We build the policy and the compliance file; where you also need the underlying contract drafted or your Form 3CEB CA sign-off arranged, our CA services team carries that alongside.

Who it’s for

• Indian companies with a foreign parent, foreign subsidiary, or overseas group entity they transact with regularly
• Captive software development, ITeS or BPO subsidiaries invoicing a foreign parent on a cost-plus basis
• Groups with related-party domestic transactions approaching or past the ₹20 crore specified domestic transaction threshold
• CFOs and founders who need Form 3CEB filed each year and want the Local File built once, not rebuilt every October
• Larger groups crossing the Master File or CbCR revenue thresholds that need the full three-tier documentation, not just the Local File

Eligibility & requirements

• Form 3CEB applies to any international transaction with an associated enterprise (as defined under section 92A), regardless of the transaction's value
• Rule 10D Local File documentation becomes mandatory once aggregate international transactions exceed ₹1 crore in the financial year
• Specified domestic transactions under section 92BA require the same documentation once their aggregate crosses ₹20 crore in the year
• For AY 2026-27, Form 3CEB is due 31 October 2026, one month ahead of the 30 November 2026 ITR due date that applies to TP-covered taxpayers
• Master File Part B (Form 3CEAA) applies only where the group's consolidated revenue exceeds ₹500 crore and the entity's own international transactions exceed ₹50 crore (₹10 crore where they involve intangibles)
• Country-by-Country Report (Form 3CEAD) applies only to groups whose parent's consolidated revenue exceeds ₹6,400 crore

How CapEasy handles it

1. We map every associated-enterprise relationship and transaction type against the section 92A/92B/92BA thresholds, so you know exactly which filings actually apply to you
2. We select and document the arm's length pricing method — cost plus, TNMM or another of the six statutory methods — with the comparables analysis behind it
3. We draft or update the group's transfer pricing policy: the pricing rationale and markup structure the intercompany agreements are meant to implement
4. We prepare the Rule 10D Local File — ownership structure, functional analysis, comparables and working papers — so it is in place before the accountant's report is signed
5. A chartered accountant issues Form 3CEB; you review and sign it, and we file it by the statutory due date
6. Where your group crosses the Master File or CbCR thresholds, we prepare Form 3CEAA and coordinate Form 3CEAD with the foreign parent's filings
7. We hand over a compliance calendar for the next financial year, so the Local File stays a live document instead of an October scramble

Documents you’ll typically need

• Existing intercompany agreements — service, licensing, cost-sharing or loan arrangements with the AE
• Financial statements and the trial balance for the transactions being tested
• Group organisation chart and shareholding structure up to the ultimate parent
• Invoices, purchase orders or correspondence evidencing the actual transaction terms
• Any prior year's transfer pricing study or Form 3CEB, if this is not your first filing
• Comparable company data used, or to be used, to benchmark the pricing
• Board resolutions or approvals authorising the intercompany arrangement, where applicable

CapEasy is a private consultancy and is not affiliated with any government authority. We help you assess eligibility and prepare and file your application; eligibility and approval depend on your specifics and the relevant department’s discretion.