Business · Companies · 8 hrs ago
Foreign investors urge India to address tax rule use on older shares
International investors have raised concerns with Indian tax authorities about the use of a tax rule called JAAR.
The rule has been used to deny tax benefits claimed by at least three Mauritius investors who sold shares bought before April 1, 2017.
Under the India-Mauritius treaty, profits from selling these older shares are spared from capital gains tax.
In March, the tax authority said another anti-avoidance rule, GAAR, would not affect these shares, so investors say using JAAR instead undermines that protection.
India’s Supreme Court said in January 2026 that tax officials can use GAAR and JAAR together or separately.
The tax authority’s view is that a change in law may be needed to prevent JAAR being used in these cases.
Investors have asked the government to intervene, but the sources do not say what action will follow.
International investors have asked Indian tax authorities to address the use of the judicial anti-avoidance rule to deny tax relief on older shares.
The rule was used to reject benefits claimed by at least three Mauritius investors who sold shares acquired before April 1, 2017.
Investors say applying the rule conflicts with protections for these shares under the India-Mauritius tax treaty and a Central Board of Direct Taxes statement.
The investors’ group, ASIFMA, raised the issue with Central Board of Direct Taxes officials about a week before the report.
The tax board reportedly believes a legal change may be needed, following a Supreme Court ruling that tax authorities can use the two anti-avoidance rules separately or together.
- Who
- International investors belonging to ASIFMA, and Indian tax authorities.
- What
- Investors urged the authorities to address use of the judicial anti-avoidance rule to deny tax relief on grandfathered shares.
- When
- ASIFMA representatives met Central Board of Direct Taxes officials about a week before October 18, 2026. The Supreme Court ruling mentioned in the report was in January 2026.
- Where
- India; the meeting was with Central Board of Direct Taxes officials.
- Why
- Investors say using the rule conflicts with protections for grandfathered shares and with the stated intent of the tax authorities.
International investors and ASIFMA
Indian tax authorities
Treatment of older shares
International investors and ASIFMA
Investors say invoking the judicial anti-avoidance rule after the tax board said GAAR would not affect grandfathered shares is a retrograde step.
Indian tax authorities
The tax board reportedly considers that any change preventing JAAR use in such cases should be made through legislation.
Legal basis
International investors and ASIFMA
Investors seek government intervention to resolve the issue.
Indian tax authorities
The tax board reportedly says an executive decision could conflict with the Supreme Court ruling allowing GAAR and JAAR to be invoked separately or together.
The Indian Supreme Court questioned the English common-law position that taxpayers may arrange their affairs to reduce tax.
The Central Board of Direct Taxes said gains from sales of grandfathered shares would not be affected by GAAR.
The Supreme Court ruled that tax authorities could invoke GAAR and JAAR together or separately.
ASIFMA investors met Central Board of Direct Taxes officials to raise concerns about JAAR.
- Shares at issue
- Acquired before April 1, 2017
- Investors affected
- At least three Mauritius investors
- Industry group
- Asia Securities Industry & Financial Markets Association (ASIFMA)
- Tax authority
- Central Board of Direct Taxes (CBDT)
- Supreme Court ruling
- January 2026
- Threshold for GAAR
- Tax benefits exceeding ₹3 crore
What people are saying
It may, however, be difficult for CBDT to address the JAAR issue through a circular as such a notification may run into legal hurdles. So, it has to be taken up with the government for legal amendment
Investors conveyed the point that both GAAR and JAAR are anti-abuse provisions that are invoked to tax investors which resort to artificial structures to avail tax benefits. So, using JAAR after CBDT prohibited the use of GAAR for grandfathered shares is a somewhat retrograde step
Under the circumstances, foreign investors were told that an executive decision to extend the protection on grandfathered shares from JAAR could be construed as going against the Supreme Court