Risk-Based Approach Proposed for Transfer Pricing Audits in India

India's Ministry of External Affairs has announced a proposal to replace the system of automatic transfer pricing audits with a risk-based system. Currently, related-party cross-border transactions exceeding a threshold of INR 150 million are automatically audited.

Under the proposed risk-based approach, the Indian tax authorities would instead evaluate the risk profile and potential for tax evasion when choosing which transactions to audit. The purpose of the change is to reduce the compliance …