Raising the threshold for specified domestic transaction

In a second blow to Chartered Accountants FM has raised Limit for Audit of Specified Domestic Transaction to Rs. 20 Crore from Rs. 5 Crore with effect from Assessment year 2016-17. This may effectively take 90% Assessees out of Ambit of  Transfer Pricing Audit of Specified Domestic Transaction.  So lesser Transfer Pricing Audit and lesser Professional Opportunities. First Blow was abolition of Wealth tax Act.

The existing provisions of section 92BA of the Act define “specified domestic transaction” in case of an assessee to mean any of the specified transactions, not being an international transaction, where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of five crore rupees.

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In order to address the issue of compliance cost in case of small businesses on account of low threshold of five crores rupees, it is proposed to amend section 92BA to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as ‘specified domestic transaction’.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 24 seeks to amend section 92BA of the Income-tax Act relating to meaning of specified domestic transaction.

The existing provisions of the said section define “specified domestic transaction” in case of an assessee to mean any of the specified transactions, not being an international transaction, where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of five crore rupees.

It is proposed to amend the said section in order to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as ‘specified domestic transaction’.

The amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015
Amendment of section 92BA.
24.     In section 92BA of the Income-tax Act, for the words “five crore rupees” occurring at the end, the words “twenty crore rupees” shall be substituted with effect from the1st day of April, 2016.
( Compiled by Taxguru Team)

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4 responses to “Specified domestic transaction audit limit raised to Rs. 20 crore”

  1. sunny says:

    SIR My only question is if two private company of one director and both the company transfer the amount of Company bank account, FOR EX ( X) company employee salary paid from Y COMP BANK Account, and transaction of these kind around in crores may i know is it lie under transfer pricing

  2. O.R.Purushotham says:

    If you don’t know the provision, KEEP QUIET. DON’T CONFUSE THE PEOPLE!!

    As per Finance Act, 2015 Section 1(2), “Save as otherwise provided in this act, sections 2 to 81 shall be deemed to have come into force on the 1st day of April, 2015”.

    U/s 25 of Finance Act, 2015 “In section 92BA of the Income-tax Act, for the words “five crore rupees” occurring at the end, the words “twenty crore rupees” shall be substituted with effect from the 1st day of April, 2016”.

    Thus Section 25 shall take effect only from ASSESSMENT YEAR 2017-18.

    Regards,
    CA.O.R.Purushotham
    CHARTERED ACCOUNTANT

    • kanha mahakud says:

      You are the only confusing person i guess. Income Tax Act never talk about P.Y. It always quote in terms of Assessment Year.. So If ministry says it is applicable from 1st april 2016, that means its is applicable from A.Y. 2016-17.. So study carefully..

      Kanha Mahakud
      Article Assistant.

      • A says:

        Thumbs up!
        Respected ORP. Taxguru Team are not rookie. They are professionals. I’m sure they verify everything before posting on their website. Anyways, all I would like to say is Khana has corrected you and has saved you from future embarrassments.

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