India's Central Board of Direct Taxes has issued two notifications amending its income tax rules to confirm that pre-April 2017 investments remain shielded from GAAR scrutiny — providing long-sought tax certainty for investors as India transitions from its 1961 to its 2025 tax legislation.

RF Report

India’s Central Board of Direct Taxes (CBDT) has released Notification 54/2026 and Notification 55/2026, introducing amendments to the Income Tax Rules, 1962 and 2026, concerning the application of the general anti-avoidance rule (GAAR) on income derived from investment transfers.

The primary objective is to exempt income derived from the transfer of investments made before 1 April 2017, from certain regulatory chapters. Both notifications clarify that while modern tax benefit rules generally apply to any arrangement regardless of its start date, these grandfathered assets remain protected from such scrutiny.

Specifically, the amendments clarify the following:

  • Notification No. 54/2026: Amends Rule 10U of the Income-tax Rules, 1962. It stipulates that the provisions of Chapter X-A (GAAR) of the Income-tax Act, 1961, shall not apply to any income accruing, arising, or received from the transfer of investments made prior to 1 April 2017. The explanatory memorandum further confirms that these GAAR provisions will not be invoked on or after the publication date of these rules for such pre-April 2017 investments.
  • Notification No. 55/2026: Amends Rule 128 of the Income-tax Rules, 2026. It provides a corresponding exemption, stating that Chapter XI of the Income-tax Act, 2025, will not apply to income from the transfer of investments made before 1 April 2017, regardless of when the arrangement was entered into.

By amending the rules for both the 1962 and 2026 frameworks, the government ensures consistency in how historical investments are treated under current law. It ensures that investors who made commitments before 1 April 2017 are protected from GAAR scrutiny regarding those specific investments, providing tax certainty even as the underlying primary legislation transitions from the 1961 Act to the 2025 Act.

These changes officially take effect upon their publication or at the start of the 2026 fiscal year.