SAAR vs. GAAR

In the words of Indian judiciary¹ "tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges". Indian Courts have time and again operated on the principle of substance over form, thereby questioning the basic intent of the transaction and declaring them as entered for avoidance of tax. In order to continue the anti-avoidance principles, special anti-avoidance rules (SAAR) and general anti-avoidance rules (GAAR) have been introduced to the Income-tax Act, 1961 (IT Act) over a period of time.