General Anti-Avoidance Rule (GAAR)

The General Anti-Avoidance Rule (GAAR) is a legal principle used by tax authorities to prevent taxpayers from abusing tax laws to reduce their tax liability artificially. It targets arrangements or transactions that, while technically compliant with the law, are primarily designed to avoid paying taxes. GAAR empowers tax authorities to disregard or recharacterize such transactions, ensuring that tax benefits are not wrongly claimed through artificial or abusive schemes. Its purpose is to promote fairness and integrity in the tax system by curbing aggressive tax avoidance strategies.