To address the issue of compliance cost in small businesses, the Budget has increased the threshold limit under which domestic transfer pricing provisions will be triggered. The threshold limit for domestic transaction has been upped to ₹20 crore from ₹5 crore now.

Samir Gandhi, Partner, Deloitte, Haskins & Sells, said increase in threshold limit for application of domestic transfer pricing from ₹5 crore to ₹20 crore is welcome step.

“One would have expected some more refinements in this aspect, for example, application of domestic transfer pricing  only in cases where transactions are not tax neutral — transactions between a tax holiday entity and non-tax holiday entity. In all other cases, it will not apply,” he said.

Considering that transfer pricing disputes are of significant concern and where one cannot yet say that India has reached the sweet spot, the country has some distance to travel in this area, he said

Vaishali Mane, Executive Director, Walker Chandiok & Co LLP, said the increase in the Specified Domestic Transfer pricing limit (from ₹5 crore to ₹20 core) is welcome as this will benefit small companies from unnecessary compliances and hassles.

“However, there are no other amendments in transfer pricing. The industry had expectations around safe-harbour, advance pricing agreement and other measures for reduction in litigation,” he said

Rohan Phatarphekar, Head of Transfer Pricing, KPMG in India, said the increase in threshold will aid in reduction of compliance for companies benefiting from this.

“It is important to mention that the previous Budget covered a number of positive developments on transfer pricing like introduction of the range, use of multiple year data for comparability, roll back of Advance Pricing Agreements, etc., for which the taxpayers are yet awaiting the rules to be announced”, he said.  

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