However, for financial year 2012 to 2013 the tolerance band will go down to 3%.
Taxpayers can be reassured though that transactions during the 2011 to 2012 year that vary from the arm’s-length price by up to 5% will not be subject to an adjustment.
Section 92 of the Income Tax Act 1961 states: “...the Central Government hereby notifies that where the variation between the arm's-length price determined under section 92C and the price at which the international transaction has actually been undertaken does not exceed 5% of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's-length price for assessment year 2012-13.”
