Form 3CEB Explained: Key Details for Filing Transfer Pricing Certification

Transfer Pricing Regulations were adopted in India through Finance Act,2001 that led to a revision of Section 92 and adding new section from 92A to 92F under Income-tax Act, 1961. The OECD guidelines formed the backbone of these provisions. Transfer pricing provisions form an important basis for fair and equitable taxation in case of international trade. It aims to govern international transactions or specific domestic transactions (SDTs) among associated enterprises (“AE”) in ensuring that they are conducted at arm’s length prices (“ALP”) so as to avert profit shifting from high-tax jurisdiction to low/no taxation areas with the overall objective being that these group entities should reduce their tax base.

Ensure Compliance Today! Contact our expert team to guide you through the Form 3CEB filing process and avoid penalties.

What is Form 3CEB?

As per Section 92E of the Act, Form 3CEB is a certification from a Chartered Accountant(“CA”) specifying that transactions occurred between AE(s) are conducted at ALP .

Who Needs to File (Form 3CEB Applicablity) :

Every person who has entered into an

- International transaction (irrespective of any amount) or

- SDT (only if it exceeds INR 20 crores)

International transactions includes:

• purchase, sale, transfer, lease or use of tangible or intangible property
• capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;
• provision of services, including provision of market research, development, management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service
• a transaction of business restructuring or reorganisation, entered with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date.

Form 3CEB Due Date:

For the financial year 2023-2024, Form 3CEB must be filed by 31st October 2024 by the entities engaged in international transactions or SDTs.

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Key Components of Form 3CEB

Part A – General Information (Contains Clauses from 01 to 09): It includes details of Assessee like Name, address, PAN, Nature of business, Aggregate value of international transaction or SDT as per books of accounts.

Part B – International Transaction Details (Contains Clauses from 10 to 20): It includes List of AE(s) with whom the assessee has entered into international transactions with brief business description of the AE(s) and particulars (Amount, nature, most appropriate method adopted for benchmarking etc) with respect to International Transaction occurred and other details depending upon the nature of transaction took place during the year.

Part C - Specified domestic transactions (Contains Clauses from 21 to 25): It includes details of SDT(s) occurred under section 80A, 80IA(8) , 80IA(10) section115 BAB and 115 BAE  where the aggregate of such transactions entered into by the assessee during the year exceeds a sum of ? 20 crores.

Filing Process

Step1- Assign CA and Form 3CEB - Log in to the assessee’ s e-filing portal and add the selected CA to "My Chartered Accountants" list. Choose Form 3CEB, select the appropriate filing type and assessment year, and assign the form to CA by selecting their name.

Step 2- CA Review and Acceptance: The CA will receive the assigned form in their "For Your Action" section. They can either accept or reject the assignment

Step 3- Completion of Form by CA: Once accepted, the CA will review and complete the form based on their audit of Assessee’ s transactions.

Step 4-Review and Approval: The completed form will appear in Assessee’ s "For Your Action" section marked as "Pending for Acceptance." Review the form carefully, then accept or reject it. Upon acceptance, the form will be successfully filed.

Common Mistakes:

• Avoid Last- Minute Filing Issues: To prevent complications, refrain from leaving Form 3CEB filing until the last minute since e-filing portal tends to get slow towards the end of deadline.
• Thorough Review of Related Party Transactions: Carefully review all transactions even if the transaction occurred is of insignificant value since in Form 3CEB every transaction is reported irrespective of any value.
• Provide all information/ documents required: It is the responsibility of the assessee to provide details required by the CA during the transfer pricing audit.
• Unbiased Audit by the CA: CA is required to conduct audit of the reportable transactions in fair manner.
• Valid Digital Signature Certificate (DSC): Both the taxpayer and the CA must have a valid DSC for filing. Check the expiration date of the DSC to avoid last-minute renewal issues. 

Avoid costly mistakes! Schedule a consultation with our transfer pricing specialists to ensure accurate and timely Form 3CEB filing.

Implications of Non-Compliance

Penalties and Fines

Failure to furnish the report u/s 92E (i.e. Form 3CEB): Penalty of Rs. 100,000

Providing insufficient information or incorrect information - Penalty of 2% of the transaction value

Legal and Financial Ramifications:

Non-compliance can result in substantial financial, legal, and reputational repercussions, as well as a loss of public trust for businesses. Failure to comply with the provisions applicable to Form 3CEB may lead to heightened scrutiny by Income tax authorities.

Best Practices for Filing Form 3CEB

• Maintaining proper records: It is fundamental for compliance with transfer pricing regulations and for ensuring financial transparency. Well-maintained records facilitate smoother audits by the CA
• Regular Review: Periodic reviews of transfer pricing policies and documentation helps in analysing the effect of dynamic business environment
• Seeking Professional Advice: Consulting with experts is essential for overcoming the complexities of international tax regulations and optimizing transfer pricing strategies. 

Conclusion

In the context of regulatory compliance, the timely and accurate filing of Form 3CEB is not just confined to a procedural obligation but it is a crucial component of maintaining legal and financial integrity. It ensures transparency in the financial transaction with AEs. Meeting deadlines is crucial as failing to do so may result into serious repercussions such as monetary fines, legal disputes or even ruining a company’s name.