The government of India introduced new tax rules with their new budget target to reducing litigation with multinational firms over cross-border transactions the government considers tax avoidance schemes.
Now days, transfer pricing is an application used by multinational companies around the world to reduce their tax burden by paying for services across borders between their different parts. There has been a rush in tax disputes related to the practice over the past year as India try to find out best way of revenue to meet harsh fiscal discrepancy targets. Therefore the new rules would clarify the tax liability of companies and it will be applicable for five years beginning assessment year 2013/14. The new regulations are expected to enable tax authorities to accept companies’ transfer pricing claims without further scrutiny in some cases.
