General Anti-Avoidance Rules (GAAR)
Legal Basis and Scope
GAAR is a set of provisions in Chapter X-A of the Income Tax Act, 1961, inserted through the Finance Act, 2012, and effective from April 1, 2017. GAAR empowers Indian tax authorities to re-characterise or disregard an "impermissible avoidance arrangement" — broadly, any transaction or structure whose main purpose is to obtain a tax benefit and which lacks commercial substance, misuses treaty provisions, lacks bona fide intent, or is not at arm's length. Once GAAR is invoked, consequences can include denial of treaty benefits, recharacterisation of income, and disallowance of deductions. The threshold for invoking GAAR is a tax benefit exceeding ₹3 crore from the arrangement.
- Chapter X-A of the Income Tax Act, 1961 — contains Sections 95–102, the GAAR provisions.
- Finance Act, 2012 introduced GAAR; Finance Act, 2015 deferred implementation to April 1, 2017.
- Tax benefit threshold: ₹3 crore — arrangements below this threshold are not subject to GAAR.
- Onus of proof: Initially on tax authorities to demonstrate that an arrangement is an "impermissible avoidance arrangement."
- Approving Panel: A mandatory independent Approving Panel must review and approve any GAAR invocation before tax authorities can act.
- GAAR applies only prospectively — to arrangements entered into on or after April 1, 2017; the March 31, 2026 gazette notification reaffirms this.
● Tracked since April 01, 2026 · last seen April 12, 2026 · updates as the daily brief publishes