General Anti-Avoidance Tax Rule to start from April 2017

The Central Board for Direct Taxes (CBDT) has announced that the General Anti-Avoidance Rule (GAAR) will start from April 1, 2017 to check tax evasion and avoidance. GAAR was announced as part of the 2012-13 Budget speech of the then Finance Minister Pranab Mukherjee. However, its implementation was repeatedly postponed because of the apprehensions expressed by foreign investors. Their main apprehension among foreign investors is over provision in GAAR allowing the government to retrospectively tax overseas deals involving local assets. Foreign investors fear that government may tax participatory notes (p-notes), which could attract a tax rate of up to 15%.