GENERAL ANTI-AVOIDANCE RULES IN INDIA: STRIKING A BALANCE BETWEEN TAX PLANNING AND TAX EVASION

AUTHORS – ADV MONICA MADAAN* & ARRYAN MOHANTY**

* LLM STUDENT OF KR MANGALAM UNIVERSITY, GURUGRAM

** STUDENT OF SYMBIOSIS LAW SCHOOL, NAGPUR

BEST CITATION – ADV MONICA MADAAN & ARRYAN MOHANTY, GENERAL ANTI-AVOIDANCE RULES IN INDIA: STRIKING A BALANCE BETWEEN TAX PLANNING AND TAX EVASION, ILE TAXATION LAW AND LEGAL STUDIES (TLLS), 3 (1) OF 2025, PG. 01-14, APIS – 3920 – 0024 & ISSN – 2583-9551

Abstract

India’s tax system has dramatically changed with implementing the General Anti-Avoidance Rules (GAAR), which are intended to curtail aggressive tax avoidance strategies without impeding legal tax plans. This study explores GAAR’s goals, structure, and effects in India, paying special attention to its attempts to distinguish between legal tax planning and illegal tax evasion. Under GAAR, tax authorities can remove tax benefits obtained through arrangements primarily intended to get tax benefits or lack actual economic substance. Although its implementation strengthens the government’s ability to combat profit shifting and erosion of the tax base, it raises questions about predictability, certainty, and the discretionary authority granted to tax officials. GAAR’s legislative and judicial background is carefully assessed in this study, focusing on essential clauses, cutoff points, and procedural safeguards, such as the role of the Approving Panel. It also examines how GAAR might affect cross-border transactions, foreign investment, and India’s overall business environment. Comparative analyses from other international jurisdictions provide a broader view of anti-avoidance frameworks, which helps contextualise India’s approach. According to the paper, maintaining investor confidence and economic competitiveness while maintaining the tax system’s integrity depends on the prudent application of GAAR. It concludes that for GAAR to deter tax evasion without becoming a tool of arbitrary taxation, there must be transparency, consistency in interpretation, and strong institutional safeguards.