General Anti Avoidance Rules:
India has amended income tax rules and has clarified that gains arising from assets acquired before April 1, 2017, will remain outside the ambit of general anti-avoidance rules (GAAR).
- General Anti Avoidance Rules is an anti-tax avoidance law in India to curb tax evasion and avoid tax leaks.
- It came into effect in 2017. The GAAR provisions come under the Income Tax Act, 1961.
- It was recommended by the Parthasarathi Shome Committee
- It is specifically aimed at cutting revenue losses that happen to the government due to aggressive tax avoidance measures practiced by companies.
- GAAR is a tool for checking aggressive tax planning, especially those transactions or business arrangements that are entered into with the objective of avoiding tax.
- It is meant to apply to transactions that are prima facie legal, but result in tax reduction.
- GAAR applies only if the tax benefit exceeds ₹3 crore in a financial year.
- GAAR provisions give wide powers to tax authorities to treat any arrangement or a transaction as an ‘impermissible avoidance arrangement’ (IAA) and re-compute income and consequent tax implications.
