Govt releases GAAR draft rules

p>In a bid to avoid tax evasion, the government of India published draft rules of the controversial General Anti-Avoidance Rule (GAAR) on Thursday. It is schedule to be implement from next financial year (1st April 2013).

It is expected that GAAR will make our tax system more transparent and flawless. It will nab both individuals and industries that adopt various means to avoid tax.

There were fears among Foreign Institutional Investors (FII) and corporate sectors who argue that after implementation of General Anti-Avoidance Rule (GAAR), the cash inflow into India from abroad will be choked or affected up to great extent as it will empower taxmen to scrutinise older corporate transactions and uncertainty in corporate deals.

To address the fears of FII, Prime Minister on June 27 convene a meeting with key officials to discuss the possible fears of FIIs and industries and asked the committee to sort out the flaws.

The draft rules were prepared on the recommendations of a committee headed by Director General of the Income Tax (International Taxation).

According to draft rule, only those income or transactions will come under the provisions of GAAR, which will touch or cross the threshold limit. However, the threshold limit has not been announced.

The committee also made it clear that GAAR will be stricter not retrospectively.

--With Agencies Inputs--