Transfer pricing is a concept adopted by most of the nations of the world to countercheck the nations money going into the hands of foreign nationals by colourable devices.
Under transfer pricing, the fair price at which the goods or services should have been transferred to related parties outside india is determined and income tax is calculated on the the fair transfer price so calculated, thereby ensuring that there is no evasion of tax. There are various methods prescribed under Income Tax Law of India to determine the transfer price to related foreign parties.
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