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Union Budget 2013: Modified GAAR to be implemented from April 1, 2016

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The government will implement the modified version of GAAR from April 1, 2016, Finance Minister P. Chidambaram said his Budget speech.

The General Anti-Avoidance Rules (GAAR), aimed at companies and investors routing money through tax havens such as Mauritius, had been scheduled to be implemented from April 2014.

In January, Mr Chidambaram had clarified that the anti-avoidance rules will not apply to foreign funds that were not taking tax benefits from India's various tax treaties with other nations.

The rules will also not apply to non-resident Indians running foreign funds.

According to the proposed rules, investments made before August 30, 2010, will not attract tax provisions under the rules. However, they will apply to investors who route through tax-havens such as Mauritius for getting tax benefits.

India gets nearly 40 per cent of its total foreign direct investment inflows through Mauritius, besides large portfolio investments.

India's moves to toughen tax collection last year triggered an outcry from global industry groups and were blamed for a fall in investment flows into India.

In response, Prime Minister Manmohan Singh set up a panel to look at ways of addressing concerns that the new laws were arbitrary.

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