Income Tax Rules 2026 Amend GAAR

India amends Income Tax Rules, 2026 under the Income Tax Act, 2025 to exclude investments made before 1 April 2017 from GAAR. The amendment clarifies grandfathering provisions and removes ambiguity in tax treatment.

General Anti-Avoidance Rules (GAAR):

Dimension	Key Details
Legal Basis	Is governed under the Income Tax Act, 2025 and introduced through the Finance Act, 2012.
Effective Date	Has come into effect from April 2017.
Objective	Provides for addressing aggressive tax avoidance.
Recommendation	Is recommended by the Parthasarathi Shome Committee.
Applicability Conditions	Applies when arrangements lack commercial substance, show abuse of law, involve non-arm’s length related party transactions, or create abnormal rights.
Threshold	Applies only when the annual tax benefit exceeds ₹3 crore.
Grandfathering Provision	Provides for exclusion of investments made before 1 April 2017 from GAAR.
Grandfathering Definition	Provides for continuation of old tax rules for investments made before a specified date despite subsequent changes.
Recent Amendment	Provides for clarification of grandfathering by excluding pre-1 April 2017 investments under Income Tax Rules, 2026.