Overview
- The Central Board of Direct Taxes, in a March 31 gazette notice that took effect April 1, 2026, said income from transferring investments made before April 1, 2017 will not face General Anti‑Avoidance Rules under the updated Income‑tax Rules, 2026.
- GAAR is India’s anti‑tax avoidance regime that lets officials disregard transactions lacking real business purpose, and the change clarifies that the promised grandfathering for pre‑2017 investments stands intact.
- Uncertainty had spiked after the Supreme Court in January held Tiger Global liable for capital gains on its 2018 Flipkart exit, saying Mauritius entities used as conduits could lose treaty benefits despite tax residency certificates.
- Private equity and venture funds with legacy stakes gain immediate relief because exits from pre‑2017 investments will not be re‑opened under GAAR, which reduces fears of retrospective taxation and prolonged disputes.
- Tax advisers caution that GAAR can still target the wider deal structure and claims of treaty abuse, and Indian companies are seeking clear rules on withholding taxes for cross‑border payments like dividends, interest, royalties and fees to avoid being treated as at fault if treaty rates are later denied.