What is meant by General Anti-Avoidance Rule?
General Anti-avoidance Rule (GAAR) is a concept which generally empowers the Revenue Authority in a country to deny tax benefit of transactions or arrangements which do not have any commercial substance and the only purpose of such a transaction is achieving the tax benefit.
Is the general anti-avoidance provisions?
Part ivA of the income Tax Act is the general anti‑avoidance rule for income tax. it protects the integrity of our income tax system by ensuring that arrangements that have been contrived to obtain tax benefits will fail.
Which is not a requirement for the general anti-avoidance rule to apply?
Subsection 245(4) states that the rule does not apply to an avoidance transaction if it may reasonably be considered that the transaction would not result in a misuse of the provisions of the Act or an abuse having regard to the provisions of the Act read as a whole.
When can Gaar apply?
GAAR applies to any arrangement that is considered an Impermissible Avoidance Arrangement (IAA). Furthermore, under its provisions, certain transactions are deemed to lack commercial substance. GAAR is not merely restricted to cross-border transactions, but also applies to domestic arrangements.
What is GAAR Upsc?
The General Anti-Avoidance Rule (GAAR) is an anti-tax avoidance law in India. It came into effect on 1st April 2017. In this article, we present all the important information about this law for the IAS exam. This comes under both the economy and governance sections of the UPSC syllabus.
Is GAAR implemented in India?
GAAR was finally introduced in India by then Finance Minister, Pranab Mukherjee, on 16 March 2012 during the Budget session introduced vide Finance Act, 2012.
What is Division 7A ATO?
Division 7A is part of the Income Tax Assessment Act 1936 and is intended to prevent profits or assets being provided to shareholders or their associates tax free. A Division 7A deemed dividend is generally unfranked.
What is Gar tax?
The General Anti-Avoidance Rule essentially states that where a transaction, or a series of transactions results in a reduction, avoidance, or deferral of taxes owing, and the transaction or the series of transactions are only being attempted for the tax benefits, the transaction or transactions themselves may be …
What are the three requirements that must be established to permit application of GAAR?
There are three requirements for GAAR to apply: “tax benefit”, “avoidance transaction” and misuse or abuse of the Act.
What do you understand by general anti-avoidance rule GAAR )? Discuss in detail its different provisions and its applicability in Indian context?
GAAR is specifically against transactions where the sole intention is to avoid tax. In this the taxpayers used legal steps which results in tax reduction, which steps would not have been undertaken if there was no tax reduction. This kind of tax avoidance planning is sought to be covered by GAAR.
In which of the following provision GAAR will not apply?
The amendments carried out in the Income Tax Rules state that Rule 10U(1)(d) has been amended to provide that GAAR will not apply to income earned/received by any person from transfer of investments made before April 1, 2017.
What is general anti avoidance rules (Gaar)?
General Anti Avoidance Rules (GAAR) has been introduced to overcome the problem of Tax Avoidance. It is intended to target tax evaders like Indian companies and investors trying to route investments through tax havens in order to avoid taxes. In past, many developed countries have implemented GAAR.
When does an avoidance arrangement lack commercial substance?
The general rule is that an avoidance arrangement lacks commercial substance if it results in a significant tax benefit for a party but does not have a significant effect upon either the business risks or the net cash flow of that party (s 80C).
When does the general anti-avoidance rule apply?
The general anti-avoidance rule can be applied if an avoidance arrangement (in other words, an arrangement that results in a tax benefit) is an “impermissible avoidance arrangement”.
What is an impermissible avoidance arrangement Under GAAR?
GAAR allows tax authorities to call a business arrangement or a transaction ‘impermissible avoidance arrangement’ if they feel it has been primarily entered into to avoid taxes. Once an arrangement is ruled ‘impermissible’ then the tax authorities can deny tax benefits.