The government has taken a major step in boosting overseas participation and provide a relief to the overseas investors. They have done this by postponing the implementation of provisions under the General Anti Avoidance Rules (GAAR ) by two years, till April 1, 2016. Giving a big relief to overseas investors,
The Finance Minister, Mr. P Chidambaram had said in lieu of this information that all the circumstances and relevant factors have been considered, before the government arrived at this postponement. The provisions of Chapter 10A of the Income Tax Act (dealing with GAAR) will now come into force from April 1, 2016 instead of the earlier planned April 1, 2014.
The GAAR provisions, had been introduced by the then FM Mr. Pranab Mukherjee during the Budget Session of 2012-13. The GAAR provisions then, were aimed at ensuring a check on tax avoidance by overseas investors. The proposal, had then, generated a lot of controversy, and the investors, mostly overseas, had expressed concerns and apprehensions that this rule might lead to harrassment by tax authorities and also lead to many investors pulling out of India.
This, and other concerns by investors, was taken into account when the Prime Minister set up the Shome Committee to investigate it the proposed GAAR terms. It is on the findings and subsequent recommendations of the Committee, that this decision of postponement has been taken. The government, as Mr. Chidambaram further said, has also accepted major recommendations of the panel with some amount of suitable and policy centered modifications.
He said that these modifications are fair, just and are said to be non-discriminatory. The recommendations and modifications aim to strike a balance between interests of Fiscal revenue and also the interest of all investors. It was also intimated that the GAAR provisions, in turn would address and override the double taxation avoidance agreement (DTAA). The DTAA would benefit, in the event of the arrangements being intended only to evade taxes.
The Minister was hopeful that now the apprehensions should be laid to rest and that no investor would need to think about his investments in India. In due course, these arrangements (DTAA), will eventually be brought under GAAR. The Minister also clarified that NRIs will not be covered under GAAR.
Chidambaram clarified that FII investments, which aim to seek benefit under the Sec 90 & 90 A of the Income Tax Act (those dealing with DTAA) would be covered under this arrangement.
