Amendments To General Anti-Avoidance Rule – An Overview

The Central Board of Direct Taxes ('CBDT') on March 31, 2026, issued two Notifications, making amendments to the Indian Income-tax Rules, 1962 ('1962 Rules') and the Income-tax Rules, 2026 ('2026 Rules'), to restore the grandfathering of investments made prior to April 1, 2017, and excluding the applicability of the General Anti-Avoidance Rule ('GAAR') in respect of such investments. The present alert captures the legal position pre and post the Notifications issued by the CBDT.

Legal Position Prior to SC's Decision in AAR vs. Tiger Global International II Holdings¹:

i. India codified the doctrine of 'substance over form' by introducing the GAAR under Chapter X-A of the Indian Income-tax Act, 1961 ('1961 Act'), effective for Assessment Year 2018-19 onwards. GAAR vested sweeping powers with the Revenue to declare an arrangement as an 'impermissible avoidance arrangement' and, consequently, deny a 'tax benefit', including a benefit under an applicable Double Taxation Avoidance