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What is General Anti Avoidance Rule (GAAR)?

General Knowledge Category: Indian Economy, India: An Overview

The General Anti Avoidance Rule (GAAR)- proposed by the then Union Finance Minister Pranab Mukherjee during the annual budget 2012-13- is anti-tax avoidance rule, drafted by the Union Government of India, which prevents tax evaders, from routing investments through tax havens like Mauritius, Luxemburg, Switzerland.

According to the draft, GAAR will come into effect from 1 April 2013. As per the guidelines, FII not opting for treaty benefits and ready to pay taxes will not come under GAAR, but those who do opt for dual taxation avoidance agreements will come under its purview.

The Union Government was forced to defer the rules until 1 April 2013, as foreign investors had expressed their reservation about the language used in the rules. Investors had maintained that the ambiguous language used in the draft of the GAAR could lead to the misuse of the rule.

What are Tax Havens?

Tax havens are countries which have low tax regimes which provide individuals and business opportunities of tax avoidance or tax evasion. There are roughly 45 tax havens in the world today. In Indian context, Mauritius is considered to be the most significant tax havens or tax evading route.

In more precise words the Mauritius route can be described as a channel used by individuals and Multi National Companies to evade paying taxes in India. The tax evasion in India through this route is estimated to be in tune with 55 billion dollar, mostly attributed to the loopholes in a bilateral agreement on double taxation.

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16 Comment

Fazil Nk ,

Govt. Of India has decided to implement GAAR again in the 2015-16 Annual budget.

Sameer Yenpure,

GAAR will implement from 2016-17.


very easy question


it will be from 1 april 2016

pushpraj soni,

sir i know the date of imlification according to me real time is 2014


sir i want to know the date of implementation of gaar ...i think it should be postponed upto 2015...

rakesh chauhan,

why investors choose mauritious route and how

janak parekh,

dear sir im pursued company secratory as per my new sellebus for taxation for neqw topic for General Anti Avoidance Rule (GAAR) basic information...

Subhash Singh,

Dear Sir/Madam, Can you provide us Full Artical of GAAR. Regards S.Singh

akash kandikatla,

give full infirmation about gaar. and its positive and negative effect on indians. and send me full report in hindi also


when GAAR willl be implemented in India? what is the reason for its delay?


what will be the effect on retail business?


do fii and fdi would come under gaar? ? are there any loopholes in gaar which would weaken the gaar?

papun kumar,

some tm creat a lots treaty for ahead country by strong minister but as shame to know all as collapse worse as minister


certainly thisis and commendable step by the indian government to control black money money laundering.

rahul gaur,

give full infirmation about gaar. and its positive and negative effect on indians. and send me full report in hindi also rahul

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