The Classic Partners LLP
Domestic Transfer Pricing (Specified Domestic Transactions)
Transfer pricing isn't only a cross-border discipline. Specified Domestic Transactions above Rs. 20 crore — chiefly involving tax-holiday units and related entities — attract the full arm's length, documentation, and Form 3CEB machinery.
Check Your SDT ExposureWhat are Specified Domestic Transactions?
Under Section 92BA, domestic related-party dealings become subject to transfer pricing law when their aggregate value exceeds Rs. 20 crore in a financial year. The provision targets profit-shifting between differently-taxed domestic entities — particularly where one enjoys a tax holiday or concessional regime.
Transactions Covered
- Transfer of goods or services between a tax-holiday unit and other businesses of the same taxpayer (Sections 80-IA(8)/(10) and analogous provisions) at other-than-market value.
- Transactions between the taxpayer and closely connected persons producing more-than-ordinary profits in incentive units, including SEZ units under Section 10AA.
- Any other transaction notified for the purpose.
- Note: payments to related parties under the erstwhile Section 40A(2)(b) clause were removed from SDT scope by the Finance Act, 2017 — a frequent source of over-compliance.
Compliance Obligations
- Arm's length pricing using the same six methods and benchmarking discipline as international TP.
- Rule 10D documentation for the SDTs — see TP documentation.
- Form 3CEB reporting of every SDT, certified by a CA — see transfer pricing audit.
- Assessment exposure: SDTs can be referred to the TPO like international transactions — see TP assessment — with tax-holiday deductions recomputed on adjustment.
Our Domestic TP Services
Applicability Testing
Annual Rs. 20 crore aggregation and Section 92BA mapping.
Inter-Unit Pricing
Market-value transfer pricing for tax-holiday and SEZ units.
SDT Benchmarking
Comparable analysis tailored to domestic datasets.
Documentation & 3CEB
Complete SDT compliance within the annual TP cycle.
Deduction Defence
Protecting 80-IA/10AA claims when pricing is questioned.
Assessment Support
TPO representation through assessment and beyond.
Frequently Asked Questions
What is a specified domestic transaction?
A domestic related-party transaction covered by Section 92BA — principally inter-unit transfers involving tax-holiday undertakings and dealings with closely connected persons of incentive units — where the aggregate of such transactions exceeds Rs. 20 crore in the year.
What is the threshold for domestic transfer pricing?
Rs. 20 crore of aggregate specified domestic transactions in a financial year; below this, Section 92BA does not apply, though general provisions on market value for tax-holiday units still operate.
Do SDTs require Form 3CEB?
Yes. Specified domestic transactions must be reported in Form 3CEB with CA certification by 31 October, alongside any international transactions.
Are payments to relatives or group companies still SDTs?
Expenditure covered by the erstwhile Section 40A(2)(b) was removed from SDT scope by the Finance Act, 2017; the current focus is tax-holiday and SEZ-linked transactions and notified categories.
What happens if an SDT is not at arm's length?
The TPO can adjust the transfer price, which recomputes — and typically reduces — the tax-holiday deduction, with interest and penalty exposure; documentation and benchmarking are the defences.
Running tax-holiday or SEZ units with internal transfers?
Test your Section 92BA exposure before the department does — our domestic TP team can start today.
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