Section 94B Thin Capitalization: 30% EBITDA Interest Cap Guide

Tax calculation with paperwork and a calculator

1. Executive Overview & The Global Anti-Base Erosion Architecture

In multinational corporate financial structuring, a multinational enterprise (MNE) can finance its cross-border operating subsidiaries through two primary capital instruments: equity or debt. While dividends distributed on equity capital represent post-tax profit allocations that are generally non-deductible for the paying company, interest paid on debt instruments represents a deductible business expenditure under Section 36(1)(iii) of the Income-tax Act, 1961. Historically, MNE groups systematically exploited this asymmetry through a tax planning practice termed "Thin Capitalization": deliberately under-capitalizing an operating subsidiary with minimal equity while stuffing its balance sheet with disproportionately high intercompany debt from an offshore affiliate situated in a low-tax or no-tax jurisdiction. The resulting massive interest deductions completely stripped the taxable profit base of the source country, shifting profits into tax havens.

To eliminate this aggressive base erosion strategy, the OECD/G20 Base Erosion and Profit Shifting (BEPS) project formulated BEPS Action 4 ('Limiting Base Erosion Involving Interest Deductions and Other Financial Payments'), recommending that countries cap net interest deductions to a fixed percentage of operational cash earnings. Implementing this global standard, Parliament enacted Section 94B into the Income-tax Act through the Finance Act, 2017. Section 94B establishes a strict statutory ceiling: interest or similar consideration paid or payable by an Indian company or a Permanent Establishment (PE) of a foreign company to its non-resident Associated Enterprise (AE) shall be restricted to a maximum of thirty per cent (30%) of its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

The reach of Section 94B extends far beyond direct intercompany loans: under Section 94B(1) Explanation, any loan borrowed from a third-party commercial bank or financial institution is deemed to be a loan issued by an associated enterprise if the overseas AE provides an implicit or explicit corporate guarantee, or deposits a corresponding amount with the lender. While the statute permits disallowed interest to be carried forward for set-off for up to eight (8) consecutive assessment years under Section 94B(4), failing to manage these thresholds exposes corporate borrowers to heavy tax additions, dividend distribution frictions, and severe scrutiny during transfer pricing audits. Furthermore, Tax Auditors must scrutinize and report Section 94B computations in Clause 30B of Form 3CD. Deploying enterprise transfer pricing suites like assureTP and automated direct tax platforms like assureTax is essential for corporate finance teams to model optimal debt-equity ratios and ensure audit-proof statutory reporting.

2. Statutory Architecture: Section 94B Operational Conditions & Deemed Debt

Corporate tax professionals must analyze the foundational statutory conditions precedent that trigger Section 94B disallowances:

Statutory Parameter	Governing Text & Requirement	Key Compliance Benchmark & Audit Test
Covered Assessees	Section 94B(1)	Applies to an Indian company or a Permanent Establishment (PE) of a foreign company in India incurring deductible interest expenses.
Target Debt Instrument	Section 94B(1) & (5)	Applies to interest or similar consideration paid or payable in respect of any form of debt, including loans, debentures, bonds, financial leases, and derivative financing charges.
Associated Enterprise Nexus	Section 94B(1) read with Section 92A	The debt must be issued by a non-resident Associated Enterprise (AE), OR by a third-party lender where the AE provides an implicit/explicit guarantee or matching deposit.
The ₹1 Crore De Minimis Threshold	Section 94B(2)	Section 94B is triggered ONLY IF the total deductible interest or similar consideration paid or payable to non-resident AEs exceeds ₹1,00,00,000 (Rupees One Crore) in the previous year.
The 30% EBITDA Disallowance Ceiling	Section 94B(2)	Deduction is restricted to the lower of: (a) Total interest paid/payable to AE; OR (b) 30% of EBITDA of the borrower. Excess interest is disallowed.
Carry-Forward Window	Section 94B(4)	Disallowed interest is carried forward for set-off against business profits for up to eight (8) assessment years, subject to the 30% EBITDA limit in each subsequent year.
Exempted Business Sectors	Section 94B(3) (Amended by Finance Act 2020)	Permanently Exempt: (a) Banking companies; (b) Insurance companies; and (c) Non-Banking Financial Companies (NBFCs) engaged in the business of lending or financing.

3. Deep-Dive Technical Mechanics: Calculating EBITDA & Deemed Associated Enterprise Debt

3.1 Mathematical Computation of EBITDA under Section 94B

Under Section 94B(2), the benchmark for interest deductibility is thirty per cent of the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). However, calculating EBITDA under tax law differs substantially from standard commercial accounting metrics:

Tax EBITDA = Profits and Gains of Business or Profession (PGBP) as computed under Sections 28 to 44DB + Interest Expense (deducted under Sections 36(1)(iii)/57) + Depreciation & Amortization (deducted under Section 32)

Crucial Computation Nuances:

Starting Point: The computation starts from the taxable business profit under PGBP, NOT the accounting profit before tax reported in the audited Profit and Loss Account.
Other Heads Excluded: Income from House Property, Capital Gains, and Income from Other Sources (e.g., dividend income or bank interest) are excluded from EBITDA.
Negative or Zero EBITDA: If the calculated tax EBITDA of the company is zero or negative (due to business operating losses), the permissible 30% interest allowance is NIL. Consequently, the entire interest paid or payable to the non-resident AE is completely disallowed in that previous year and must be carried forward under Section 94B(4).

3.2 The Deemed Associated Enterprise Trap: Guarantees & Back-to-Back Deposits

The Explanation to Section 94B(1) establishes an expansive anti-avoidance deeming fiction designed to defeat structured third-party borrowing:

Where an Indian company borrows funds from an independent commercial bank (e.g., State Bank of India, Citibank, or HSBC) or a third-party institutional lender, the debt is deemed to be issued by an associated enterprise IF:
1. An overseas Associated Enterprise provides an implicit or explicit guarantee to the lender; OR
2. The overseas AE deposits a corresponding and matching amount of funds with the lender (back-to-back funding).
Impact: Even though interest is paid to an unrelated third-party bank, the interest expense is pulled squarely into the Section 94B net, subject to the ₹1 Crore threshold and 30% EBITDA cap!
Letter of Comfort / Corporate Guarantee: If a foreign parent issues a corporate guarantee, a sponsor support undertaking, or an explicit debt service reserve undertaking to an Indian bank to secure credit lines for its Indian subsidiary, all interest paid on that bank facility is treated as AE interest under Section 94B.

3.3 The Disallowance Formula & Carry-Forward Mechanics: Section 94B(4)

Under Section 94B(2), the amount of interest disallowed in the current year is determined as:

Excess Interest Disallowed = Actual Interest Paid/Payable to AE − [30% of EBITDA]

The carry-forward and set-off of this disallowed interest under Section 94B(4) follows strict statutory rules:

8-Year Carry-Forward Window: The disallowed excess interest can be carried forward for a maximum period of eight (8) assessment years immediately succeeding the assessment year for which the excess interest was first computed.
Set-Off Hierarchy: In any subsequent year, the carry-forward interest is allowed as a deduction against business profits, provided that: Total Interest Allowed (Current Year AE Interest + Brought-Forward Disallowed Interest) ≤ 30% of Current Year EBITDA.
Current Year Interest Precedence: Current year AE interest is set off first against the 30% EBITDA capacity; brought-forward disallowed interest absorbs any remaining headroom.
Section 79 Shareholding Restriction Interplay: Unlike business losses under Section 79, the carry-forward of disallowed interest under Section 94B is NOT subject to the 51% continuity of beneficial shareholding restriction, preserving tax shields during global M&A restructuring.

3.4 Tax Audit Reporting: Form 3CD Clause 30B Disclosures

Under Section 44AB, the Tax Auditor is legally mandated to report Section 94B computations under Clause 30B of Form 3CD:

Whether the assessee has incurred expenditure by way of interest or of similar nature exceeding ₹1 Crore as referred to in Section 94B(1);
If yes, the total amount of interest or similar nature incurred;
Calculation of EBITDA as per Section 94B;
Total amount of interest allowable (capped at 30% of EBITDA);
Amount of excess interest disallowed and carried forward;
Details of brought-forward disallowed interest from earlier assessment years, set-off during the year, and carried forward balance.

Incorrect reporting or failure to disclose deemed AE guarantees in Clause 30B exposes the tax auditor to disciplinary penalties under Section 271J and the taxpayer to misreporting penalties under Section 270A.

4. Practical Examples, Case Studies & Numerical Illustrations

The following real-world case studies illustrate the mathematical calculations, guarantee deeming fictions, and multi-year carry-forward schedules under Section 94B.

Case Study 1: Mathematical Computation of Section 94B Disallowance

Context & Financial Data: M/s Apex Tech India Ltd (an Indian operating company) has borrowed ₹50 Crore at 9% per annum from its non-resident parent entity in the UK. During FY 2024-25, its commercial and tax results reflect:

Profit before tax as per P&L: ₹12,00,00,000
Interest paid to non-resident UK parent: ₹4,50,00,000 (Exceeds ₹1 Crore threshold)
Normal tax depreciation claimed under Section 32: ₹3,50,00,000
Other non-operating dividend income: ₹1,00,00,000
Taxable Business Profit (PGBP before interest & depreciation): ₹19,00,00,000 − ₹1,00,00,000 (Dividend) = ₹18,00,00,000

Step-by-Step Statutory EBITDA & Disallowance Calculation:

Calculate Net Taxable PGBP:
Gross Business Profit (₹18 Cr) − Interest (₹4.5 Cr) − Depreciation (₹3.5 Cr) = ₹10,00,00,000.
Calculate Section 94B Tax EBITDA:
Tax EBITDA = Net PGBP (₹10 Cr) + Interest Expense (₹4.5 Cr) + Depreciation (₹3.5 Cr) = ₹18,00,00,000.
Compute Permissible 30% Interest Cap:
30% of Tax EBITDA = 30% × ₹18,00,00,000 = ₹5,40,00,000.
Evaluate Interest Deduction:
- Actual Interest Paid to UK Parent = ₹4,50,00,000.
- Because actual interest (₹4.50 Cr) is LESS than the 30% EBITDA ceiling (₹5.40 Cr), the entire interest of ₹4,50,00,000 is 100% allowable.
- Excess Interest Disallowed under Section 94B = ₹0 (NIL).
- Unused Interest Capacity of ₹90,00,000 is available for future absorption. Modeling EBITDA headroom in assureTax ensures tax-deductible borrowing.

Case Study 2: Disallowance and 8-Year Carry-Forward under High Leverage

Context & Facts: Continuing Case Study 1, assume Apex Tech India expanded borrowings from its UK parent to ₹100 Crore, paying annual interest of ₹9,00,00,000. Net taxable PGBP before interest and depreciation is ₹18,00,00,000. Depreciation is ₹3,50,00,000.

Computation & Carry-Forward Model:

Tax EBITDA remains ₹18,00,00,000. Permissible 30% Cap = ₹5,40,00,000.
Actual Interest Paid to AE = ₹9,00,00,000.
Excess Interest Disallowed under Section 94B(2):
₹9,00,00,000 − ₹5,40,00,000 = ₹3,60,00,000.
Taxable Business Income for FY 2024-25 increases by ₹3,60,00,000, creating an additional corporate tax liability of ₹90,60,480 (at 25.168%).
Carry-Forward under Section 94B(4): The disallowed ₹3,60,00,000 is carried forward to AY 2026-27 (Year 1 of 8). In FY 2025-26, if EBITDA rises to ₹30 Crore (30% Cap = ₹9 Cr) and AE interest is ₹7 Cr, Apex can deduct the current ₹7 Cr plus ₹2 Cr of brought-forward interest. Multi-year carry-forward schedules are tracked via assureTP.

Case Study 3: The Third-Party Bank Loan with Parent Corporate Guarantee Trap

Context & Facts: M/s Horizon Manufacturing Ltd borrows ₹80 Crore at 8.5% interest from State Bank of India (an unrelated domestic bank) to fund plant modernization. SBI insists on credit enhancement. Horizon's US parent company, Horizon Inc., furnishes an unconditional Corporate Guarantee to SBI guaranteeing repayment. Total annual interest paid to SBI is ₹6,80,00,000. Horizon's tax EBITDA is ₹12,00,00,000 (30% Cap = ₹3,60,00,000). The company claims zero Section 94B disallowance because interest was paid to SBI (an independent bank), not to an AE.

Deemed AE Debt under Section 94B(1) Explanation:

Under the Explanation to Section 94B(1), where an Associated Enterprise provides an implicit or explicit guarantee to a third-party lender, the debt is statutorily deemed to be issued by an associated enterprise.
The SBI loan is legally deemed to be an AE debt. Total interest of ₹6,80,00,000 exceeds ₹1 Crore.
Permissible deduction capped at 30% of ₹12 Crore EBITDA = ₹3,60,00,000.
Disallowance under Section 94B:
₹6,80,00,000 − ₹3,60,00,000 = ₹3,20,00,000 disallowed!
The company must add back ₹3,20,00,000 in Form 3CD Clause 30B. Failing to disclose corporate guarantees during tax audits triggers severe Section 270A penalties. Loan guarantee tracking is automated in assurePractice.

Case Study 4: Negative Tax EBITDA Resulting in 100% Interest Disallowance

Context & Facts: Startup 'BioHealth India Ltd' incurred substantial operational launch losses in FY 2024-25. Its Net PGBP is negative (₹8,00,00,000). Depreciation is ₹2,00,00,000. Interest paid on convertible debentures to its foreign holding company is ₹3,00,00,000.

EBITDA Analysis for Loss-Making Companies:

Tax EBITDA = Net Loss (-₹8 Cr) + Interest (₹3 Cr) + Depreciation (₹2 Cr) = negative (-₹3,00,00,000).
Where EBITDA is negative, 30% of EBITDA is mathematically zero.
Permissible Interest Deduction = ₹0 (NIL).
100% Disallowance: The entire interest of ₹3,00,00,000 is disallowed under Section 94B in FY 2024-25 and must be carried forward to subsequent years under Section 94B(4). Loss-making tech companies rely on assureFinancials to track negative EBITDA tax implications.

Case Study 5: Exemption for Non-Banking Financial Companies (NBFCs)

Context & Facts: QuickFin Capital Ltd is an RBI-registered Systemically Important Non-Deposit Taking NBFC (NBFC-ND-SI). It borrows USD 50 Million (₹420 Crore) in foreign currency debt from its Singapore parent entity, paying annual interest of ₹35 Crore against an EBITDA of ₹50 Crore (30% Cap = ₹15 Crore).

Statutory Exemption under Section 94B(3):

Finance Act, 2020 amended Section 94B(3) with retrospective effect from AY 2021-22 to explicitly exempt Non-Banking Financial Companies (NBFCs) engaged in the business of lending or financing.
Because QuickFin is a registered NBFC, Section 94B DOES NOT APPLY.
The full interest of ₹35 Crore is deductible under Section 36(1)(iii), subject only to transfer pricing arm's length benchmarking under Section 92C. NBFC debt schedules are audited in assurePractice.

Case Study 6: Interplay Between Section 92 Transfer Pricing & Section 94B

Context & Facts: Indian Company 'A' borrows ₹40 Crore from foreign parent 'B' at an agreed contract interest rate of 12% per annum (Interest = ₹4,80,00,000). During a transfer pricing audit, the TPO applies the Comparable Uncontrolled Price (CUP) method and determines the arm's length interest rate to be 8% (Arm's Length Interest = ₹3,20,00,000). The company's tax EBITDA is ₹8,00,00,000.

Sequence of Statutory Application:

Step 1: Section 92 Transfer Pricing Adjustment First:
Under transfer pricing provisions, the unallowable transfer pricing excess = ₹4,80,00,000 − ₹3,20,00,000 = ₹1,60,00,000 is disallowed under Section 92C (Primary Adjustment).
Step 2: Apply Section 94B on Arm's Length Interest:
Section 94B applies strictly to the arm's length deductible interest of ₹3,20,00,000.
30% of EBITDA Cap = 30% × ₹8,00,00,000 = ₹2,40,00,000.
Section 94B Disallowance = ₹3,20,00,000 − ₹2,40,00,000 = ₹80,00,000.
Total Tax Disallowance: ₹1,60,00,000 (Section 92C) + ₹80,00,000 (Section 94B) = ₹2,40,00,000. Transfer pricing sequencing is automated in assureTP.

Case Study 7: Impact of Section 94B on Foreign Withholding Tax (TDS u/s 195)

Context & Facts: In FY 2024-25, M/s Dynamic Infotech paid ₹2,00,00,000 interest to its US parent. Due to the 30% EBITDA cap, ₹1,20,00,000 was disallowed under Section 94B. The accountant argued that because ₹1.20 Crore was disallowed under Section 94B, withholding tax under Section 195 should be deducted only on the allowable portion of ₹80 Lakhs.

The Withholding Tax Trap:

Section 195 mandates deduction of income-tax at source on the entire gross amount of interest paid or credited to a non-resident.
Domestic deductibility under Section 94B is completely irrelevant to the payer's withholding obligations under Section 195.
Withholding tax at 5% (under Section 194LC) or 15% (under India-US DTAA Article 11) must be deducted on the entire ₹2,00,00,000. Failure to deduct tax on the disallowed portion attracts 100% penalty under Section 271C and interest under Section 201. Tax deduction workflows are verified via assureTax.

5. 10-Step Practitioner Audit Verification Program for Section 94B & Form 3CD

Corporate tax controllers, transfer pricing auditors, and statutory audit teams should execute this 10-step audit verification protocol:

Step #	Audit Verification Domain	Key Verification Actions & Evidentiary Records	Statutory Reference
Step 1	Entity Exemption Screening	Confirm whether the borrowing entity is a banking company, insurance company, or registered lending NBFC under Section 94B(3).	Section 94B(3)
Step 2	Associated Enterprise Debt Extraction	Extract all interest expense ledgers paid/payable to non-resident Associated Enterprises (loans, debentures, CCDs).	Section 94B(1) & 92A
Step 3	Third-Party Guarantee Due Diligence	Audit commercial bank loan agreements. Confirm whether foreign parent provided explicit guarantees, letters of comfort, or deposits.	Section 94B(1) Explanation
Step 4	₹1 Crore De Minimis Threshold Check	Aggregate all AE interest and deemed AE bank interest. If total is ≤ ₹1,00,00,000, record non-applicability in working papers.	Section 94B(2)
Step 5	Transfer Pricing Arm's Length Adjustment	Verify whether primary transfer pricing adjustments under Section 92C were applied first to establish the arm's length interest base.	Section 92C & 94B
Step 6	Tax EBITDA Mathematical Computation	Compute taxable PGBP under Section 28 to 44DB. Add back interest and depreciation. Exclude non-business income streams.	Section 94B(2)
Step 7	30% EBITDA Cap Application	Calculate 30% of tax EBITDA. Disallow interest exceeding this ceiling. In case of negative EBITDA, disallow 100% of AE interest.	Section 94B(2)
Step 8	Brought-Forward Interest Set-Off Schedule	Audit 8-year aging schedule of brought-forward disallowed interest. Utilize available EBITDA capacity following current-year interest.	Section 94B(4)
Step 9	Tax Audit Report Form 3CD Reporting	Ensure complete, accurate disclosures in Clause 30B of Form 3CD (EBITDA, interest incurred, allowable interest, and carry-forward).	Form 3CD Clause 30B
Step 10	Withholding Tax (TDS u/s 195) Audit	Verify that withholding tax was deducted on the gross interest paid to non-resident AE, irrespective of Section 94B domestic disallowance.	Section 195 & 194LC

6. Elevating Transfer Pricing Governance with the AssureOffice Suite

Managing multi-entity cross-border debt facilities, modeling dynamic 30% EBITDA interest limitation schedules, and tracking 8-year carry-forward ledgers demands enterprise software automation:

assureTP: The premier transfer pricing and thin capitalization suite. Automatically identifies direct and deemed AE debts, models 30% EBITDA interest deduction ceilings, tracks multi-year Section 94B(4) carry-forward schedules across 8 assessment years, and integrates with arm's length CUP interest benchmarking.
assureTax: Houses a dedicated Tax Audit Form 3CD Module. Reconciles corporate general ledgers with Clause 30B schedules, calculates tax EBITDA from PGBP schedules, models Section 195 withholding tax debits, and automates ITR-6 Schedule CFL (Carry Forward of Losses and Interest) data mapping.
assureFinancials: Provides automated trial balance grouping, tracks third-party bank guarantee covenants, and generates deferred tax schedules for temporary interest disallowances under Ind AS 12.
assureNotice: Organizes transfer pricing and thin capitalization audit dockets, tracks TPO show-cause notices, and maintains digital archives of parent corporate guarantees and loan agreements.
assurePractice: Empowers chartered accountancy firms and multinational corporate tax teams to manage client transfer pricing dockets, track Section 139(1) due dates, and streamline Form 3CEB certification workflows.

7. Comprehensive Practitioner FAQs on Section 94B Thin Capitalization

Q1: Does Section 94B apply if the interest paid to a non-resident Associated Enterprise is exactly ₹1,00,00,000?

No. Under Section 94B(2), the provision applies where the interest or similar consideration exceeds one crore rupees. If the total interest is exactly ₹1,00,00,000, Section 94B is not triggered. However, the moment it reaches ₹1,00,00,01, Section 94B applies to the entire borrowing.

Q2: Does Section 94B apply to interest paid to a domestic Indian bank if the foreign parent provided a corporate guarantee?

Yes. Under the Explanation to Section 94B(1), where an Associated Enterprise provides an implicit or explicit guarantee to a third-party lender, the debt is deemed to be issued by an associated enterprise, pulling all interest paid to the Indian bank into the Section 94B net.

Q3: What happens to the interest disallowed under Section 94B? Can it be carried forward?

Yes. Under Section 94B(4), the disallowed interest can be carried forward for a maximum period of eight (8) consecutive assessment years immediately succeeding the assessment year in which it was first disallowed, to be set off against future business profits within the 30% EBITDA cap.

Q4: How is EBITDA calculated if the company has incurred a business loss during the year?

If the calculated tax EBITDA is negative or zero, the allowable 30% interest deduction is mathematically zero. Consequently, 100% of the interest paid to the non-resident AE is disallowed in that year and must be carried forward.

Q5: Are Non-Banking Financial Companies (NBFCs) exempt from Section 94B?

Yes. The Finance Act, 2020 amended Section 94B(3) with retrospective effect from AY 2021-22 to explicitly exempt registered NBFCs engaged in the business of lending or financing, in addition to banking and insurance companies.

Q6: Does Section 94B apply to interest paid on Compulsorily Convertible Debentures (CCDs)?

Yes. Section 94B(5) defines "debt" broadly as any loan, debenture, or other financial instrument. Interest or coupon paid on CCDs issued to a non-resident AE is fully subject to Section 94B.

Q7: Can a company claim a deduction for brought-forward disallowed interest if current year AE interest already exceeds 30% of EBITDA?

No. Current year AE interest takes precedence and absorbs the 30% EBITDA capacity first. Brought-forward disallowed interest can be set off only if there is remaining unabsorbed headroom under the 30% EBITDA cap.

Q8: Does the change in shareholding restriction under Section 79 apply to the carry-forward of disallowed interest under Section 94B?

No. Section 79 restricts the carry-forward of business losses and unabsorbed depreciation upon a change in beneficial shareholding exceeding 49%. It does NOT apply to disallowed interest under Section 94B(4), preserving interest carry-forward during corporate M&A transactions.

Q9: Which comes first: Section 92 Transfer Pricing Arm's Length Adjustment or Section 94B?

Section 92 transfer pricing adjustments are applied first. The TPO determines the arm's length interest rate. Any excessive interest is permanently disallowed under Section 92C. Section 94B is then applied strictly to the remaining arm's length interest amount.

Q10: Does Section 94B apply to an Indian branch or Permanent Establishment (PE) of a foreign company?

Yes. Section 94B(1) explicitly applies to an Indian company or a Permanent Establishment of a foreign company in India.

Q11: Can an Indian company deduct withholding tax (TDS) under Section 195 only on the allowable portion of interest?

No! Section 195 mandates tax deduction at source on the gross amount of interest paid or credited to the non-resident. Disallowance under Section 94B is a domestic tax computation matter and does not reduce withholding tax obligations.

Q12: Are processing fees and debt arrangement fees included in "interest or similar consideration"?

Yes. Section 94B(5) covers interest or "similar consideration", which encompasses loan processing fees, commitment charges, guarantee fees, and debt origination costs paid to the AE.

Q13: Does Section 94B apply to interest paid to a resident associated enterprise?

No. Section 94B applies strictly to interest paid or payable to a non-resident Associated Enterprise (or debt backed by a non-resident AE guarantee). It does not apply to domestic transactions between resident entities.

Q14: Where must Section 94B computations be reported in the Tax Audit Report?

Section 94B computations, EBITDA calculations, and carry-forward schedules must be reported in Clause 30B of Form 3CD.

Q15: Does an implicit parent guarantee (without a signed formal contract) trigger Section 94B on bank loans?

The Explanation to Section 94B(1) explicitly uses the phrase "implicit or explicit guarantee". Tax authorities actively examine parent credit support, letters of comfort, and syndicated loan covenants to establish implicit guarantees and pull third-party bank loans into Section 94B.

Q16: How does assureTP assist multinational corporations with Section 94B compliance?

assureTP automates thin capitalization calculations, tracks direct and deemed AE debts, models 30% EBITDA interest limits, maintains 8-year carry-forward schedules, integrates with arm's length transfer pricing benchmarking, and generates pre-validated Form 3CD Clause 30B schedules.