India: clarification on computation of arm’s length price

April 30, 2013

On 15 April 2013, the Government issued clarifications via Notification No. 30/2013 on the computation of the arm’s length price (ALP) for different categories of taxpayers in India for the financial year 2012–13.

By way of background, section 92C(2) of the Income Tax Act 1961 (ITA) details the computation of the ALP from a transfer pricing perspective.

Pursuant to the notification, the authorities have clarified that, where the variation between the ALP determined under section 92C of the ITA using the methods as prescribed and the transfer price, or the price at which a specified domestic transaction (SDT) has actually been undertaken, does not exceed 1% of the latter with regard to a wholesale trader and 3% for all other categories, the transfer price or the price at which SDT has actually been undertaken shall be deemed to be the ALP.

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