Govt puts off GAAR 2 years, till April 2016
The government on Monday deferred implementation of the controversial General Anti-Avoidance Rules by two years to April 1, 2016; but only investments made before August 30, 2010 will not attract tax provisions under the proposed new rules.
Earlier, the Parthasarathi Shome committee had advised that GAAR’s implementation be deferred by three years till April 2017.
The government said GAAR will not apply to non-resident investors in FIIs or to foreign funds not seeking tax benefits from India’s tax treaties with other nations. Only tax benefits of Rs 3 crores and above will come under GAAR. This is important as some reports claimed even salaried individuals could come under GAAR if the tax authorities thought their salaries were structured to reduce tax outgo.
Union finance minister P. Chidambaram said Monday the government had “considered all the circumstances and relevant factors”, and no investor “should now have any apprehension about his investments in India”.
GAAR, introduced in the Budget by former finance minister Pranab Mukherjee, was aimed at companies and investors routing money through tax havens like Mauritius, and was to come into effect from April 2014. But after FIIs reacted negatively, fearing harassment, Prime Minister Manmohan Singh set up an expert committee under Parthasarathi Shome to examine the matter.
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