Two-year GAAR respite will help tackle irritants
GAAR will apply only to the arrangements wherein the tax benefit is R3 crore (approx $600 thousand) or more. With the tax rate on capital gains ranging from 10-20%, this would translate into gains of R15 crore to R30 crore (approx $3 to 6 million) and much higher sales values. Even at the tax rate of 30% and 40% applicable to domestic and foreign companies, respectively, the threshold for other transactions would be R7.5 crore to R10 crore (approx $1.5 to 2 m). This is a reasonable threshold and should help reduce costs for tax payers as well as the revenue in administering GAAR.
Investments made before August 30, 2010, ie the date of introduction of the Direct Taxes Code Bill 2010 (DTC), will be spared. It is not yet clear if this will apply only to the gains made at time of exit or would also apply to income arising from such investments in the shape of interest, dividends or otherwise. One will need to wait for the Budget proposals and/or any detailed circular that may be issued to ascertain the full implications. With the substantial uncertainty that prevailed over the provisions
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