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Published on 20 June 2025

Transfer Pricing Thresholds in India: What Changed?

Introduction Imagine being a small or medium business owner in India back in 2015—drowning in paperwork every time you crossed a mere ₹5 crore in inter‑company dealings. You spent lakhs on transfer‑pricing reports and Form 3CEB filings just to prove you weren’t hiding profits.

1. What Are Specified Domestic Transactions (SDTs)?

SDTs are simply transactions between related parties within India. They include:

  • Section 80A deals Internal transfers at non‑market prices.
  • Section 80‑IA(8) transfers Trades between exempt and non‑exempt units.
  • Section 80‑IA(10) business transactions Excess profits via related enterprises.
  • Chapter VI‑A / Section 10AA transactions Deals involving SEZ units.
  • Prescribed transactions Any other deals the government adds to the list.

These rules exist to prevent profit‑shifting and ensure fair taxation.

2. The Big Shift: ₹5 Crore → ₹20 Crore

“In section 92BA of the Income‑tax Act, for the words ‘five crore rupees’, substitute ‘twenty crore rupees’ with effect from April 1, 2016.”

  • Old threshold: ₹5 crore
  • New threshold: ₹20 crore

Raising this bar meant that thousands of SMEs could ditch the compliance grind.

3. Real‑Life Impact on Businesses

3.1. ABC Manufacturing Group

  • Pre‑2016: ₹12 crore in inter‑company transfers → ₹3–5 lakh spent on compliance.
  • Post‑amendment: Below ₹20 crore → freed funds for R&D and expansion.

3.2. XYZ IT Services Consortium

  • Pre‑2016: ₹8 crore in service charges → ₹2–3 lakh on transfer‑pricing docs.
  • Post‑amendment: Exempt from SDT requirements → significant annual savings.

3.3. DEF Realty Group

  • Still over ₹20 crore → must maintain full documentation.

4. Effects on Tax Professionals

  • Routine SDT work: Volume dropped dramatically.
  • Specialized projects: Greater demand for in‑depth economic analyses, benchmarking, and sector reports.

5. Current Compliance Landscape

  • Threshold: Remains at ₹20 crore.

  • CBDT tolerance bands: ±1% (wholesale trading), ±3% (others).

  • Three‑tier documentation:

    1. Local file: Entity‑specific details.
    2. Master file: Group‑level information.
    3. Country‑by‑country report: For large multinationals.

Software solutions now streamline these requirements, reducing manual effort.

6. What’s Next?

  • Income Tax Bill 2025: Maintains the ₹20 crore threshold.
  • International alignment: Convergence with OECD guidelines.
  • Digital transformation: Compliance becomes faster and more accurate.

Conclusion

This regulatory tweak wasn’t just about changing a number—it was a lifeline for thousands of SMEs, freeing them from the paperwork police while still keeping big transactions under watch. For most businesses, the jump from ₹5 crore to ₹20 crore truly was a compliance revolution.

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