Transfer Pricing Penalty: Section 271G, 271BA & 271AA — Computation, Defence Strategies & Judicial Precedents Quick Answer: What Are the Penalties for Transfer Pricing Non-Compliance? The Income-tax Act, 1961 prescribes three specific penalties for transfer pricing non-compliance: (1) Section 271G — penalty of 2% of the value of the international transaction or specified domestic transaction […]
Category Archives: Business Model
Business Model
Transfer Pricing for Intangibles & Marketing: AMP Expenditure Disputes 📌 Quick Answer: Transfer pricing for intangibles — including marketing intangibles, brand development, and AMP (advertising, marketing, and promotion) expenditure — is one of the most contested areas in Indian transfer pricing. The Revenue authorities have historically argued that Indian subsidiaries of multinational enterprises incur excessive […]
Thin Capitalisation Rules: Section 94B Interest Limitation 📌 Quick Answer: Section 94B of the Income Tax Act limits the deduction of interest paid or payable to an associated enterprise (AE) — whether directly or through a non-AE lender backed by an AE guarantee — to 30% of EBITDA (earnings before interest, taxes, depreciation, and amortisation) […]
Management Fees & Intra-Group Services: TP Benchmarking & Low Value 📌 Quick Answer: Management fees and intra-group service charges paid to associated enterprises must satisfy the benefit test (the service must confer an identifiable benefit), the need test (the recipient would have paid an independent party or performed the activity in-house), and be benchmarked at […]
Downstream Investment Under FEMA: Rules, Reporting & Compliance 📌 Quick Answer: Downstream investment refers to investment made by an Indian entity — which itself has received foreign investment — into another Indian entity. Governed by Rules 2(xiii) and 23 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and Press Note 3 of 2020, downstream […]
Liaison Office & Branch Office in India: RBI Approval, Annual Reporting & Closure — Complete Guide Quick Answer Foreign companies seeking to establish a presence in India without incorporating an Indian subsidiary can set up a Liaison Office (LO) or Branch Office (BO) under the FEMA (Establishment in India of a Branch Office or a […]
Cap Table Management: Anti-Dilution, ESOP Pool & Waterfall Analysis 📌 Quick Answer: A capitalisation table (cap table) is the definitive record of a startup’s equity ownership structure. Effective cap table management requires understanding three critical concepts: anti-dilution provisions that protect investors from down rounds, ESOP pool sizing that balances employee incentivisation with founder dilution, and […]
Bridge Rounds & Down Rounds: Valuation, Anti-Dilution & FEMA Impact 📌 Quick Answer: A bridge round is short-term financing (typically via convertible notes or CCDs) designed to provide runway until a full priced round. A down round is a priced equity round at a valuation lower than the previous round. Both have significant implications under […]
Specified Domestic Transactions: Section 92BA Transfer Pricing — Compliance, Documentation & Benchmarking Guide Quick Answer: What Are Specified Domestic Transactions Under Section 92BA? Specified Domestic Transactions (SDTs) are certain categories of domestic transactions between related parties or associated enterprises that are subject to transfer pricing provisions under the Income-tax Act, 1961. Introduced by the Finance […]
DLOM in Indian Valuations: Chaffe & Finnerty Models 📌 Quick Answer: How is DLOM applied in Indian share valuations? Discount for Lack of Marketability (DLOM) is a valuation adjustment of typically 15–35% applied to shares of private Indian companies to account for illiquidity. The two most widely accepted quantitative models are the Chaffe protective-put model […]