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GAAR (General Anti Avoidance Rules) in India

Asked in Offshore (General) for India

0
What Does GAAR do :

I Allows tax authority to
declare an ‘impermissible
avoidance arrangement’
| After such declaration, tax
liability to be determined
as if the arrangement did
not exist
| Arrangement given a wide
definition
| Any step in or a part or
whole of any transaction,
operation, scheme,
agreement or
understanding, whether
enforceable or not would
be covered
| Also includes the alienation
of any property
| P-notes, sub accounts
excluded
| No retrospective effect
| Onus of proof lies with the
tax authority
| May affect investments


The draft guidelines of GAAR, which were announced after the prime minister assumed additional role of the finance minister, has allayed fears of the foreign institutional investors (FIIs). The draft suggests that GAAR will not be invoked against promissory note (P-Note) holders. Further, only income accruing after April 1, 2013 will be subject to the provisions, implying that GAAR would not apply with retrospective effect as feared by many.

The dilution of GAAR comes as a big relief for equity markets and foreign investors and clarity on the taxation front would provide the much needed encouragement for future capital flows.
 
Tax Tax authority Investment
 
Posted by Pradeep Bhandari,Intuit Management Consulting on Jul 09, 2012 at 06:33
 

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