Govt finally notifies 5% tolerance range for AY 2012-13

After a long wait of over one year, CBDT has finally notified transfer pricing tolerance range of 5% for AY 2012-13. So if the variation between arm's length price and actual transaction price does not exceed 5% of the later, the transaction price is acceptable. This applies for international transactions carried during financial year 2011-12.


The law was amended by Finance Act, 2011 to remove 5% range provided in the Act itself, with the hope that industry-wise safe harbour range will be notified. But the absence of range since last year's Budget had created a uncertainty while setting up the arm's length prices. Atleast, the notification has now been issued well before the Nov 30th deadline for finalising the transfer pricing reporting for AY 2012-13.


Read Taxsutra's recent Taxring on this topic.