Introduction Of Gaar (General Anti Avoidance Rules)

Erstwhile finance minster Pranab Mukherjee introduced the highly controversial law against tax avoidance through foreign investments in his Union Budget speech. GAAR, or the General Anti Avoidance Rules, entails rules and laws that targets entities evading taxes by quelling companies and investors from routing investments through tax havens for the purpose of avoiding paying taxes. This, in general, met with much criticism that compelled the then finance minister to defer the implementation of GAAR to April 2013. Pranab Mukherjee clarified that a provision under GAAR which compels the tax payer to furnish enough evidence that there has not been any tax avoidance will be removed. This amendment, however, will lie with tax officials. On November 19, the newly instated finance minister P Chidambaram exclaimed that amendments to GAAR have been finalized and the government has appointed a committee headed by tax expert Parthasarthi Shome to look into their concerns. Committee headed by Parthasarathi Shome has submitted two reports — on GAAR and retrospective amendments relating to indirect transfers.

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