India: Transfer pricing proposals in budget 2017 | KPMG | US

India: Transfer pricing proposals in budget 2017

India: Transfer pricing proposals in budget 2017

The budget, presented by the Finance Minister on 1 February 2017, includes the following transfer pricing-related proposals.

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  • Transfer pricing documentation and certification requirements with respect to expenditures involving domestic related parties would no longer be required. Transaction between related parties that are "tax neutral" would not be subject to the transfer pricing rules (from FY 2016-2017 onwards).
  • The concept of a "secondary adjustment" on transfer pricing adjustments would be introduced, so that a taxpayer would be required to make a secondary adjustment when the primary adjustment to the transfer price is made in certain situations.
  • In line with recommendations from the OECD's base erosion and profit shifting (BEPS) project, there are thin capitalisation rule provisions that would not allow deductions for certain payments of interest. No deduction would be allowed when an Indian company (or permanent establishment in India of a foreign company) pays interest exceeding INR one crore in respect of debt issued or guaranteed by a non-resident related party and that is determined to be "excess interest."
  • There would be new penalty provisions for furnishing incorrect information.
  • The time for completing assessments would be reduced from 21 months to 18 months starting with AY 2018-19, and beginning for AY 2019-20, the time limit would be 12 months from the end of the year of assessment in which the income was first assessable.

 

Read a February 2017 report [PDF 323 KB] prepared by the KPMG member firm in India

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