Recently, in India general anti-avoidance rule (GAAR) has been introduced which will become effective from 1 April 2015 (Financial Year 2015-16).
The rules for application of the GAAR provide certain exceptions which clarify that the GAAR will not apply to:
- An arrangement when the tax benefit arising to all the parties to the arrangement in the relevant Indian tax year does not exceed INR 30 million in the aggregate (approximately U.S. $500,000).
- A foreign institutional investor (FII) which:-
- is a taxpayer (assessee) under the Indian domestic tax law;
- has not asserted a benefit under a tax treaty; and
- has invested in listed securities, or unlisted securities, as specified.
- A non-resident person who has invested by way of offshore derivative instruments or otherwise, directly or indirectly, in an FII.
- Any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person from transfer of investments before 30 August 2010.
The GAAR will apply to any arrangement (regardless of the date on which it has been entered into), in respect of the tax benefit obtained from an arrangement on or after 1 April 2015. The procedural aspects also provide that the basis and reasons for invoking the GAAR must be clearly mentioned in an effort to bring any particular arrangement under the rules.
