By IANS,
New Delhi : India will implement the modified General Anti-Avoidance Rules (GAAR) aimed at checking tax avoidance by overseas investors from Apr 1, 2016, Finance Minister P. Chidambaram said Thursday.
Presenting the federal budget in the lower house of parliament, Chidambaram said the Finance Act, 2012, introduced GAAR. A number of representations were received against the new provisions. An expert committee was constituted to consult stakeholders and finalise the GAAR guidelines.
After careful consideration of the report by the committee headed by Parthasarathi Shome to look into investors’ concerns, the government had announced certain decisions last month. These decisions were now being incorporated in the Income-Tax Act.
The modified provisions preserved the basic thrust and purpose of GAAR, he said.
The Finance Bill, 2013, said the modified version of GAAR would be brought in from April 2016.
The GAAR was mainly aimed at companies and investors routing money through tax havens such as Mauritius. These were scheduled to be implemented from April 2014.
In January, Chidambaram had clarified that the Rules will not apply to foreign funds that were not taking tax benefits from India’s various tax treaties with other nations. The Rules will also not apply to non-resident Indians running foreign funds.
According to the proposed rules, investments made before August 30, 2010, will not attract tax provisions under the rules. However, they will apply to investors who route through tax-havens such as Mauritius for getting tax benefits.
India gets nearly 40 per cent of its total foreign direct investment inflows through Mauritius, besides large portfolio investments.