Transfer Pricing Regulations (TPR) are applicable to entities that enter into an International Transaction with an Associated Enterprise (AE). The aim is to arrive at the comparable price as available to any unrelated party in open market conditions and is known as ALP. In terms of compliances, the taxpayers are required to maintain, on an annual basis, extensive information and documents relating to such international transactions such as:
a) A description of the ownership structure of the assessee enterprise with details of shares or other ownership interest held therein by other enterprises.
b) A profile of the multinational group of which the assessee enterprise is a part along with the name, address, legal status and country of tax residence of each of the enterprises comprised in the group with whom international transactions 56b[or specified domestic transactions, as the case may be,] have been entered into by the assessee, and ownership linkages among them.
c) A broad description of the business of the assessee and the industry in which the assessee operates, and of the business of the associated enterprises with whom the assessee has transacted.
d) The nature and terms (including prices) of international transactions 56b[or specified domestic transactions] entered into with each associated enterprise, details of property transferred or services provided and the quantum and the value of each such transaction or class of such transaction.
e) A description of the functions performed, risks assumed and assets employed or to be employed by the assessee and by the associated enterprises involved in the international transaction 56b[or the specified domestic transaction].
f) A record of the economic and market analyses, forecasts, budgets or any other financial estimates prepared by the assessee for the business as a whole and for each division or product separately, which may have a bearing on the international transactions 56b[or the specified domestic transactions] entered into by the assesse.
g) A record of uncontrolled transactions taken into account for analysing their comparability with the international transactions 56b[or the specified domestic transactions] entered into, including a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the international transactions 56b[or specified domestic transactions, as the case may be].
h) A record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant international transaction 56b[or specified domestic transaction].
i) A description of the methods considered for determining the arm's length price in relation to each international transaction 56b[or specified domestic transaction] or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case.
j) A record of the actual working carried out for determining the arm's length price, including details of the comparable data and financial information used in applying the most appropriate method, and adjustments, if any, which were made to account for differences between the international transaction 56c[or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions.
k) The assumptions, policies and price negotiations, if any, which have critically affected the determination of the arm's length price.
l) Details of the adjustments, if any, made to transfer prices to align them with arm's length prices determined under these rules and consequent adjustment made to the total income for tax purposes.
m) Any other information, data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the arm's length price.
above shall not apply in a case where the aggregate value, as recorded in the books of account, of international transactions entered into by the assessee does not exceed $ 153,846.
For further details please access following link : Sec 92A, 92B, 92D of Income tax act 1961.