Grandfathering Clause in Income Tax Law
Grandfathering Clause in Income Tax Law
DTAA amended with grandfathering clause….GAAR made applicable with grandfathering clause….what’s this whole fuss about grandfathering clause?? Let’s understand with help of live examples…
Grandfathering means new rules won’t be applicable to old things….Because old things are treated as aged, grandfather types….So the grandfather won’t be able to cope up with new rules, regulations, etc….
This grandfathering clause is introduced whenever some major amendment is proposed to be brought in...Since it will be difficult for already done things to comply with this new major amendment, such already done things are grandfathered….
A brief elucidation may be helpful here:
A] “DTAA amended with Singapore: In a relief to existing investors, shares acquired before 1 April 2017 will be grandfathered. Investments on or after 1 April 2017, shall be liable to capital gain tax”
So grandfathering here means when shares which were acquired before 1 April 2017 will be sold, capital gain tax provision will not apply on such sale…..
B]”Any investment made prior to April 1, 2017 will stand grandfathered and will be outside the ambit of GAAR”
Similarly here it means GAAR shall will not apply to income from transfer of investments before April 1, 2017.
In the next write up, i will discuss about another term “Limitation of Benefit” clause...This term is used extensively in various tax treaties….
