Budget 2017 relaxes Provisions of Domestic Transfer Pricing

Currently, provisions of domestic transfer pricing are applicable to transactions between two domestic related parties even in situations where transactions between them are tax neutral from base erosion of Indian tax base point of view. To reduce the compliance burden of taxpayers, the finance minister has now proposed to restrict the scope of domestic transfer pricing provisions only to transactions between domestic related parties, where one of the parties is eligible for claiming profit-linked deduction.

It is to be noted that TP documentation and certification compliance requirements with respective to domestic expenditures covered u/s 40A(2) of the IT Act have been removed with effect from the current fiscal year itself, namely FY 2016-17.