What is Transfer Pricing Audit? 

India has been developing rapidly recently, making it a popular destination for foreign companies. Having become a popular tourist destination due to liberalization, a growing middle class, and rising employment and wages, India has also become an attractive investment destination.

However, there are many tax and regulatory hurdles to overcome to start a business in India. To prevent multinational corporations from dodging their tax obligations in India, theIndian government passed the Transfer Pricing Regulation, which includes the conditions of a transfer pricing audit.

There is a requirement to audit the transfer price between two or more affiliated businesses when they enter a transaction. Various test techniques are used and documented to determine whether the transactions were conducted under market conditions and will withstand the scrutiny of the Income Tax Department and other tax authorities. 

Indian businesses must review and comply with the Transfer Pricing Regulations when dealing with foreign countries and maintain accurate records. A transfer pricing audit must explain how it was calculated for the businesses and transactions under review. 

Transfer pricing audits are fact-finding missions designed to evaluate a company's many operations, identify risks, determine what transfer pricing mechanism and method is appropriate, and identify relevant parties.