India: Transfer Pricing

This quarterly tax update examines critical judicial rulings that will shape international tax planning and M&A structuring in India, including the Delhi High Court's landmark decision on deputation arrangements and the Mumbai Tribunal's denial of loss carry-forward in demergers worth INR 2.4 billion.

Global Capability Centres in India have evolved from basic support operations into strategic hubs handling high-value functions like R&D, analytics, and procurement. As these centres scale and take on more complex responsibilities, multinational enterprises face heightened tax risks around permanent establishment classification and transfer pricing compliance that require careful structural review and documentation.

For multinational companies with established GCCs in India, profit repatriation is a natural extension of a successful operating model. When approached strategically, it allows businesses to optimize global cash flows while remaining aligned with India's tax and FEMA regulations.

India has evolved as a preferred destination for global firms over the years. In 2026, it’s no longer just an ‘attractive market’ anymore, but a jurisdiction where international companies are actively planning their next growth trajectory.

Within most multinational groups, transfer pricing is still perceived primarily as a technical compliance function. It is frequently treated as a year-end margin exercise — a benchmarking study intended to ensure that operating profit falls within a statistical range. Boards often view it as a documentation issue, while finance teams approach it as a provisioning variable.

Since its introduction in 2013, Form 3CEB has served as primary Transfer Pricing ('TP') disclosure form in India. Taxpayers having international transactions or specified domestic transactions...

India has long been recognized as a global hub of highly trained and skilled workforce, especially in technology, finance, and business services.

Income tax is a tax levied and charged on individuals and entities based on their income or profits, in accordance with the provisions of the Income Tax Act, 1961.

In the contemporary context of global business expansion, multinational enterprises (MNEs) are increasingly dependent on offshore subsidiaries located in India to leverage its extensive talent pool, cost efficiencies, and expanding market potential.