The Transfer Pricing is an essential and highly significant consideration for making business transactions optimally profitably between subsidiaries of a company or multinational business corporation. This transfer pricing mechanism helps in lowering taxes and maximizing the profits, by separate divisions of a multi-entity corporation, through transacting their goods or products at the selected transfer prices. This transfer pricing mechanism is used in every country, for such transactions at domestic or international level, by entities in all economic sectors. But, before proceeding further, it would be better to clarify first what is transfer pricing, giving the solid transfer pricing definition. The transfer pricing is the analysis or mechanism for setting the most suitable and beneficial prices to one's goods or products, for the purpose of making sound and profitable business dealing with associated companies or divisions. This transfer pricing analysis is inevitable when different divisions or entities of Multi-entity Corporation are considered as separately run entities, with their one independent business losses and profits. The transfer pricing policies in most of the countries are in compliance with the OECD Guidelines which are based on the Arm's Length Principle. More information about this "arm's length standard" is given exclusively in the section below.
Transfer Pricing Services India
The transfer prices are commonly decided by the Arm's Length Principle. This arm's length price is the price which any independent seller would charge from an unrelated and independent buyer for an identical or similar item, and under similar terms and conditions. In India also, the transfer pricing rules are based on the OECD (Organization of Economic Cooperation and Development) Guidelines, and are made effective since 2001, to facilitate proper income tax calculations. The Income Tax Department and the Customs Department are two main offices in India for formulation and regulation of transfer pricing. According to the Section 92 of the Indian Income Tax Act of 1961, all types of income from international transactions with associated companies will be computed on the basis of arm's length principle, and all international transaction exceeding Rs. 5 crore will exclusively be handled by the Transfer Pricing Office (TPO). The databases available with the Income Tax Department (Directorate General of Transfer Pricing) and the Customs Department, collectively serve greatly regarding transfer pricing policies in India. Ours well-informed transfer pricing services are promptly and economically available for entities in all economic sectors which are engaged in doing business transactions at domestic and international levels.