What are International Transactions?
An international transaction happens between businesses that are connected (associated enterprises) when at least one of the businesses is located in another country (non-resident). These transactions can involve:
- Buying, selling, or leasing physical or intangible assets (like property, patents, or copyrights)
- Providing services (like consulting or marketing)
- Lending or borrowing money
- Any other kind of business activity that affects the profits, losses, income, or assets of the companies involved.
International transactions can also include situations where connected businesses agree on how to share the costs of things they do together, such as developing a new product or advertising in a new market.
What are Specified Domestic Transactions?
Transactions between associated businesses within India can be classified as specified domestic transactions if they meet certain criteria. These criteria are:
- Domestic in nature: The transaction shouldn't be with a foreign entity.
- Covered by section 92BA: The nature of the transaction falls under categories defined in this section of the Income-tax Act, 1961. This might include the sale, purchase, or leasing of assets, rendering of services, or lending or borrowing of money between related parties.
- Exceeds the threshold: The total value of such transactions with related parties during a financial year surpasses ₹20 crore (effective from the assessment year 2016-17).
Note: If a transaction is classified as a specified domestic transaction, it becomes subject to compliance requirements similar to international transactions.
What is Transfer Pricing?
Transfer pricing denotes the price at which one business or division charges its associated business or division for the goods or services rendered.
Form 3CEB ensures that these intercompany transfers adhere to fair market prices, thus preventing manipulation for profit shifting and tax fraud. Essentially, Form 3CEB serves as a means to demonstrate to the Indian government that your company has appropriately priced goods and services involved in cross-entity transfers.
The due date for filing Form 3CEB for the assessment year 2024-25 is 31 October. This applies to companies mandated to provide a report under Section 92A of the Income Tax Act.
Form 3CEB is applicable to companies involved in international and specified domestic transactions with any allied enterprise. Regardless of the value of international transactions, businesses are required to file this form. However, for domestic transactions, filing is mandated only if the value exceeds Rs. 20 crore in a fiscal year.
An exhaustive report from an independent chartered accountant is essential for all businesses engaging in such transactions.
Transfer pricing refers to the fee charged by one business to its associated business for the goods and services provided. Form 3CEB adheres to two conditions outlined by transfer pricing regulations:
- International transactions involving two or more associated firms, either or both of which may be foreign businesses.
- Specified domestic transactions involving transfer pricing but excluding international transactions.
Here is how Form 3CEB is filed online:
- Appoint a CA: Find a licensed CA to audit your business transactions. Once logged into your e-filing portal, add your chosen CA to your "My Chartered Accountants" list.
- Assign the Form: Select Form 3CEB, choose the filing type and assessment year, and then assign it to your CA by selecting their name.
- CA Review and Acceptance: The CA will receive the assigned form in their "For Your Action" section. They can either accept or reject the assignment. If rejected, you'll need to reassign the form.
- Form Completion by CA: Upon acceptance, the CA will review and complete the form based on their audit of your transactions.
- Review and Approval: The completed form will appear in your "For Your Action" section as "Pending for Acceptance." Review the form thoroughly. You can accept or reject it. Once approved, the form is successfully filed.
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