Tiger Global ruling concerns:
CBDT exempts pre-FY18 investments from Gaar
New Delhi, Apr 1, 2026
CBDT clarifies GAAR provisions to exempt pre-2017 investments from scrutiny, aiming to boost investor confidence and ensure tax certainty
In a move to boost investor confidence and provide certainty, the Central Board of Direct Taxes (CBDT) on March 31, 2026, amended General Anti-Avoidance Rules (Gaar) in both old and new income-tax rules.
The notification makes it clear that Gaar will not apply to income arising from the transfer of investment made before April 1, 2017, irrespective of when a sale or exit occurred.
In the Income-Tax Act, Gaar is a rule that allows tax officers to ignore or change arrangements made mainly to save tax even if they look legal on paper.
It was introduced in India in 2012 but became effective on April 1, 2017.
The new provisions explicitly carve out such legacy transfer income from the chapter that lays down Gaar rules even if the tax benefit arises after April 1, 2017.
The explanatory memorandum states that provisions under Gaar will not be invoked for income from the transfer of investment made on or before April 1, 2017.
This amendment addresses the uncertainty created by the Supreme Court’s ruling in January in the Tiger Global case and strengthens the government’s original grandfathering intent when Gaar was introduced.
By the Supreme Court ruling in the Tiger Global case on 15 January 2026, tax on capital gains arising from Tiger Global’s 2018 sale of its Flipkart investment was upheld, even though the investments were originally made before 1 April 2017. The Court applied GAAR, holding that the arrangement lacked commercial substance.
The fresh notification says Gaar will not cover income (capital gains) from the transfer of old investment made on or before April 1, 2017. At the same time, Gaar will continue to apply to any tax-saving arrangements excluding transfers of shares bought before April 1, 2017.
The ruling had unsettled global investors, and the latest clarification is expected to ease those concerns. However, it remains unclear whether the clarification will apply to Tiger Global.
Tax experts have welcomed the clarification. Tushar Sachade, partner, Price Waterhouse& Co LLP, described it as a pragmatic step that somewhat eased uncertainty and signalled India’s commitment to a stable tax regime.
“This relief is expected to be transformative for private equity and foreign portfolio investors, setting at rest fears that historical fund structures and past exits could be subject to Gaar scrutiny,” he said.
Sandeep Sehgal, partner (tax), AKM Global, noted the amendment was largely in the nature of clarification.
It removes ambiguity around Gaar grandfathering. “The amendment doesn’t alter the outcome of the Tiger Global case, which was driven by indirect transfer considerations and therefore its applicability in the Gaar grandfathering context may be limited,” he said.
Niranjan Govindekar, partner (corporate tax), BDO India, said the protection specifically applied to income from the transfer of such investments, primarily capital gains.
“Income other than capital gains could be subject to Gaar scrutiny,” he said.
The move is seen as a positive signal for foreign investors who had made legacy investment through Mauritius, Singapore, and other routes. However, experts say broader judicial anti-avoidance principles and control and management tests laid down by the Supreme Court continue to apply independently.
This clarification is expected to bring much-needed certainty to legacy investment and reinforce India’s image as a preferred destination for long-term capital, say experts.
[The Business Standard]
