The Central Board of Direct Taxes (CBDT), under the Ministry of Finance, has issued Notification No. 54/2026 dated March 31, 2026 introducing the Income-tax (Tenth Amendment) Rules, 2026. These rules amend the Income-tax Rules, 1962, particularly Rule 10U relating to GAAR (General Anti-Avoidance Rules).
Key Highlights of the Amendment
[1] Amendment to Rule 10U(1)(d)
- The rule now clarifies that income arising from transfer of investments made before April 1, 2017 will be specifically covered for exclusion.
- Such income (whether actual or deemed) is excluded from GAAR applicability.
[2] Substitution of Rule 10U(2)
- GAAR provisions under Chapter X-A will apply to any arrangement, irrespective of when it was entered into.
- However, GAAR will apply only if tax benefit arises on or after April 1, 2017.
- Exception:
- Income from transfer of investments made before April 1, 2017 will not be subjected to GAAR, even if realized later.
Practical Impact
- Provides clarity and relief to investors holding legacy investments (pre-2017).
- Ensures GAAR is applied prospectively based on tax benefit timing, not merely on the date of arrangement.
- Prevents retrospective application of GAAR on old investments.
As noted in the Explanatory Memorandum on page 2, the amendment ensures that GAAR provisions shall not be invoked for income arising from transfer of investments made before April 1, 2017, even if such income is realized after the amendment.
Effective Date
- The rules come into force from the date of publication in the Official Gazette, i.e., March 31, 2026.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/03/CBDT-NN-54-Income-tax-Tenth-Amendment-Rules-2026.pdf
