Transfer Pricing for IT, ITES & Software Companies
Captive development centres, BPO/KPO units and SaaS subsidiaries face some of the most closely scrutinised transfer pricing questions in India. We benchmark, document and defend every one of them.
A sector shaped by captive service arrangements
Most Indian IT/ITES entities operate as captive or limited-risk service providers to a foreign parent or group company — billed on a cost-plus basis. That structure puts operating margins under constant scrutiny, and India's IT/ITES sector has historically generated more transfer pricing litigation than almost any other industry.
Typical structure
Cost-plus captive centre providing software development, technical support or back-office services to an overseas group entity, with margin fixed as a percentage of operating costs.
Where Transfer Pricing applies in IT/ITES
Captive Software Development
A development centre billing its US/EU parent on a cost-plus basis for coding, testing and maintenance work.
BPO / KPO Operations
Back-office, call-centre or knowledge-process outsourcing units servicing global group clients.
SaaS Platform Licensing
An Indian subsidiary licensing software or a platform from its foreign parent for local resale or use.
Contract R&D
An R&D centre developing IP that is owned and exploited by the foreign parent.
Onsite-Offshore Delivery
Cost and revenue allocation between onsite client-facing teams and offshore delivery centres.
Group IT Shared Services
Centralised IT infrastructure or helpdesk services charged out across group entities.
How these transactions are benchmarked
TNMM
The dominant method — benchmarking the operating margin of the captive unit against comparable Indian service providers.
CUP
Used for royalty rates on software licences and platform usage fees.
Safe Harbour (Rule 10TD)
Pre-agreed margins for eligible IT/ITES/KPO captive units, reducing dispute risk if elected.
CPM
Applied where a clear cost base and mark-up structure exists for support services.
A defensible margin, documented every year
We characterise your entity correctly (limited-risk service provider vs. entrepreneurial developer), build a benchmarking set of genuinely comparable Indian companies, and evaluate whether a Safe Harbour election or a standard TNMM position better serves your risk appetite.
Functional Characterisation
Correctly classify risk profile to justify method selection.
Safe Harbour Assessment
Model margin impact of electing Safe Harbour vs. TNMM.
Comparable Set Curation
Defensible, industry-specific comparability searches.
Litigation Readiness
Documentation built to withstand TPO and ITAT scrutiny.
Our IT/ITES Transfer Pricing services
Benchmarking Study
Multi-year comparability search using Indian financial databases.
Safe Harbour Election
Eligibility assessment and filing under Rule 10TD.
TP Documentation & 3CEB
Local File, study report and Accountant's Report, prepared annually.
Audit & Litigation Support
Representation before the TPO, DRP, CIT(A) and ITAT for margin disputes.
Running a captive IT/ITES unit in India?
Get a free margin and Safe Harbour eligibility review.