ECONOMICS

Detailed explanation-1: -The Transfer Pricing (TP) Regulations were introduced in India in the year 2001, in order to prevent erosion of Indian tax base. The Indian TP Regulations are contained in Chapter X of the Income-tax Act, 1961 (“the Act”) under the title “Special Provisions relating to avoidance of tax”.

Detailed explanation-2: -What is an Advance Pricing Agreement (APA)? An APA is an agreement between a tax payer and tax authority determining the transfer pricing methodology for pricing the tax payer’s international transactions for future years.

Detailed explanation-3: -For instating an APA, any taxpayer needs to file an application first. For unilateral APAs, application needs to be made to the Director General of Income Tax (DGIT) of International Taxation. Similarly, applications for a Bilateral APA and Multilateral APA are to be made to the Competent Authority or the CA in India.

Detailed explanation-4: -Thus, the transfer pricing regime in India applies to both domestic and international transactions, which fall above a threshold in terms of deal value. It is regulated on the basis of section(s) 92A-F, Income Tax Act, 1961 and relevant Rule(s) 10A-E of the Income Tax Rules, 1962.