General Anti-Avoidance Rules (GAAR) in India apply from April 1, 2017, to arrangement prima facie designed to obtain a tax benefit, where such arrangement lack commercial substance, misuse tax provisions, or are not bona fide. There is however a threshold of 3 crores before invoking such presumptive provisions.
In the context of international transaction the Hon’ble Supreme Court, in their judgment dated 15 January 2026 in the case of Tiger Global International Holdings, accepted the contention of the Revenue that mere production of a Tax Residency Certificate (TRC) by a non-resident is not conclusive for establishing eligibility to treaty benefits, particularly after the enactment of Sections 90(4) and 90(5) of the Income-tax Act, 1961, and in view of the statutory presumptions contained in Sections 96 and 97 of the Act.
The Apex Court has further held that the Revenue is entitled to enquire into the transaction to determine whether the claim of the assessees for exemption is lawful.
Consequently, pursuant to the aforesaid judgment, where a payee seeks to claim benefits under a Double Taxation Avoidance Agreement (DTAA) solely on the basis of the certificate of tax residency, the payer may be required to submit an application u/s 195 to the International tax section and substantiate the bona fide nature of the transaction before grant of certificate to receive any sum without deduction of tax at source.
In the absence of such certificate the tax shall be deductible by the payer at the applicable rate.