TP Compliance for NRs: Do They Need to File Form 3CEB?
CA Gaurav Garg
Chairman, NIRC of ICAI [2023-24] I Transfer Pricing I NR Taxation I Income Tax I Chartered Accountant I Speaker
As the transfer pricing compliance season begins, I frequently encounter a common question: Does a non-resident person having transactions with its Indian Associated Enterprise (AE) need to file Form 3CEB or comply with transfer pricing regulations under Chapter X of the Income Tax Act, 1961 (the Act)?
Here’s my quick take on this.
Under Section 92(1) of the Act, “Any income arising from an international transaction shall be computed having regard to the arm's length price.”
The term "any income" refers to income that falls within the scope of the Act, meaning income that is chargeable to tax in India. Therefore,
Here are some examples of transactions that fall under the purview of transfer pricing:
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Thus, once transfer pricing provisions apply, the non-resident is required to comply with all the requirements of Chapter X of the Act, including conducting a transfer pricing study under Section 92D and obtaining and e-filing an accountant’s report under Section 92E of the Act. Further, non compliance may attract various penal provisions.
Another frequent query: Does a non-resident need to do transfer pricing compliance when income is chargeable to tax in India, but the non-resident is not filing a return due to an exemption under Section 115A(5) of the Act?
Yes, even in such cases, the non-resident must comply with transfer pricing regulations, maintain proper documentation, and obtain an accountant’s report under Form 3CEB, which must also be e-filed.
Disclaimer: This article is intended solely for informational and educational purposes. It does not constitute professional advice or a legal opinion. Readers are encouraged to seek specific advice from qualified professionals before making any decisions based on the content herein.
#gauravgarg SGPM & Associates CA Gaurav Garg #incometax #taxtribune #nonresident #transferpricing
Tax Professional | Principal Consultant at Infosys ( Ex- Brookfield, KPMG, Federal-Mogul, Bharti-Infratel, Deloitte, Indiabulls, Kirloskar)
3moThanks Gaurav for the valuable technical insights !
Founder Partner | Diploma in Systems Audit DISA (ICAI)
3moThank you, CA Gaurav Garg, for the insightful post. Below are my views: Scenario-1: As AE1 Co and AE2 Co are associated enterprises (AEs), TP provisions apply. AE2 Co must comply with ALP, provide a TP report (Form 3CEB), and ensure withholding tax compliance under Section 195 for royalty payments to AE1 Co. Scenario-2: FTS payments by AE2 Co (Indian resident) to AE1 Co (non-resident) are taxable in India, requiring compliance with TP regulations and Form 3CEB. Scenario-3: (a) If AE1 Co has a PE in India, TP rules apply. AE2 Co must file Form 3CEB and AE1 Co must allocate profits per DTAA. (b) If no PE exists, AE1 Co isn't taxable in India, but AE2 Co must ensure TP compliance. Scenario-4: (a) If AE1 Co has a PE, profits are taxable; TP laws apply. (b) AE2 Co must file Form 3CEB and ensure TP compliance. Scenario-5: AE1 Co, selling Indian shares, is subject to capital gains tax under Section 9(1)(i). TP rules do not apply as the transaction involves non-resident AEs.