If you have an Indian subsidiary, either as a cost centre or a profit centre, any international transactions done with the parent entity or any other of your own company, qualifies for transfer pricing. Transfer pricing is essentially a markup that is arrived after detailed study of multiple factors and business conditions. This markup leads to the Indian subsidiary being profitable.
The current episode of eLagaan Whiteboard Friday explain in detail the concept of Transfer pricing, what are the ways you can arrive at calculating this and how do you go about the same in your setup (cost vs a profit centre).
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