I-T to check if startups’ flight flouts transfer pricing norms

Several Indian startups that flipped their structures to hold their assets, share holding, and in some cases even intellectual property outside India are set to face heat from the income tax department, said two people with direct knowledge of the matter.

The income tax department is investigating whether flipping structures could lead to any transfer pricing violations.

The tax department is looking to scrutinise several startups to see if these new structures violate transfer pricing regulations. In most cases after the structures are flipped, Indian entities operate like agents or intermediaries and pay tax only on part of the payment.

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