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India Defers Controversial Tax-Avoidance Laws to 2016

Monday, 14 Jan 2013 | 3:42 AM ET
Yamini Chao | The Image Bank | Getty Images

India will delay by two years the implementation of controversial rules on tax avoidance to 2016, Finance Minister P. Chidambaram said on Monday, giving some respite to investors after the measures dented confidence at a time the country needs capital inflows.

The General Anti-Avoidance Rules (GAAR), which will target companies and investors routing money through tax havens, had been scheduled to be implemented from April 2014. They will now come into effect from April 1, 2016.

(Read More: India Moves to Mend Public Finances, Revive Growth)

Chidambaram said GAAR will not apply to foreign funds that are not taking any benefit from India's various tax treaties with other nations.

GAAR will also not apply to non-resident Indians running foreign funds, he told a news conference.

The minimum threshold to come under GAAR will be 30 million rupees ($547,500), Chidambaram said.

India's moves to toughen tax collection last year had 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.

Stocks extended gains after the news of the GAAR deferral, although the move was expected.

(Read More: India Seizes $5 Billion Bills of Exchange From Trader)

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