Taxation - Income Tax - International

tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures. Efficient and effective tax management is the key success to any business, since it helps to reduce costs and stay ahead in today’s competitive era.

Taxation – Income Tax – International

If you think that Income Tax Provisions are too harsh, then just refer to the International Taxation / Transfer Pricing provisions of the Income Tax and then you will be bit relaxed.

When a person in India enters into an International Transaction(s) with its related party (The term ‘Related Party’ is defined in the Income Tax Act, 1961), then the Transfer Pricing Provisions are applicable to him.

In very simple term, the brief of the Transfer Pricing provisions is ‘to carry international transaction with related party at arm’s length price’. It means the transaction should be arm’s length transaction.

The term ‘Arm’s length transaction’ would mean a transaction in which the buyers and sellers of a product act independently and have no relationship to each other.

Example: If an Information Technology company located at United States opens up a wholly owned subsidiary company in India. The Indian company provides services to its holding company located in United States. It’s called an international transaction. And this transaction should be arm’s length transaction.

From the above description, it looks like it is very simple. But truly speaking, to derive at arm’s length price is the most complex issue.

We are already providing extensive professional advises with respect to above services to our existing clients.

The scope of the services includes:

  • Determining the International Transaction
  • Computing the Arm’s Length Price
  • Transfer Pricing Audit
  • Income Tax Return
  • Other professional services related to it.