Legislative Anti-Avoidance Measures - Income Tax - Ready Reckoner - Income Tax

Legislative Anti-Avoidance Measures There are two kinds of Anti-Avoidance measures available viz. SAAR and GAAR. SAAR refers to Specific Anti Avoidance Rules . It is applied in a specific situation covered by such rule. Few examples of SAAR are:- thin capitalization rule, Controlled Foreign Corporation (CFC) Rule, beneficial ownership rule, taxation of indirect transfer, etc. These rules are passed in the domestic legislation to curb specific tax avoidance techniques. GAAR refers to General Anti-Avoidance Rules. It is not always possible to draft a rule to avoid tax avoidance in every type of transactions. Tax avoidance schemes are becoming increasingly complex and tough to curb through SAARs. Therefore, GAAR can be introduced as a catch-all scheme to curb tax avoidance in general. However, the real problem with GAAR is that it can end up promoting uncertainty which is almost dangerous to operate a tax system in a country.