Recent announcement on GAAR from government
During the last budget a very controversial act GAAR (General Anti Avoidance Rule) had been introduced in hurry. After much pressure from everywhere government had postponed at that time after extreme criticism. The announcement of GAAR at that time had impacted very badly on FII investment and share market largely. We had already discussed about GAAR in detail at that time in our blog.
In short, these rules applicable on any transaction or business arrangement with intention of tax avoiding. When this rule invoked, that particular transaction or business arrangement would be impermissible & denied the claimed tax benefit.
After the much flip flop on the GAAR, the government has announced at last on Monday some significant changes and defer its implementation by two more year. It will apply only to investments made after 30 August, 2010. The other most important change is it will not apply on non resident investor in FIIs. GAAR will not apply on those FIIs who do not claim any double taxation benefit. GAAR will apply only when tax benefit exceeds Rs 3 Crore.
The one critical issue is still not clear that after GAAR implementation whether India–Mauritius Tax Treaty would be continued or not.
Regards,
Arvind Trivedi
Certified Financial Planner
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