India's CBDT grandfathered gains on investments made before April 2017
Fund tax teams must apply GAAR exclusion to investments acquired before Apr 1, 2017
Change
India's Central Board of Direct Taxes (CBDT) amended Rule 128 of the Income‑tax Rules, 2026 to confirm that gains from transfers of investments acquired before April 1, 2017 are excluded from the General Anti‑Avoidance Rules (GAAR).
Why it matters
Transfers of investments acquired before April 1, 2017 are explicitly excluded from GAAR under the amended Rule 128. GAAR applicability is tied to the date tax benefits arise, so arrangements that yield benefits on or after April 1, 2017 remain subject to GAAR even if they were entered into earlier, shifting the compliance focus to benefit-timing documentation.
Implications
- — Tax compliance teams at fund managers and private equity firms must immediately treat transfers of investments acquired before April 1, 2017 as GAAR-excluded when preparing Indian tax returns and exit computations — failure risks incorrect tax treatment on exits.
- — Legal and tax-advisory teams advising cross-border investors must update written tax opinions and sale-closing deliverables for holdings acquired before April 1, 2017 before completing exits — absence of updated advice may expose parties to indemnity claims or post-closing tax disputes.
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Source
View on Economic Times