Measures expected from India’s annual budget that could impact markets

Govt set to announce additional details behind GAAR, which will be implemented starting April 2017

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Investors in India are bracing for higher taxes and less incentives from the government’s annual Budget 2017 to be unveiled on February 1 as the focus shifts to wringing out revenues to finance giveaways and higher public investment to support the economy.

Below are the main elements expected in the measures that could impact markets:

Guidelines for General Anti-Avoidance Rules (GAAR)

– Government set to announce additional details behind GAAR, which will be implemented starting on April 2017.

– GAAR is meant to crack down on tax havens, making it harder to claim some tax exemptions.

– The government on Friday said GAAR would not apply for foreign investors based on a jurisdiction because of genuine commercial reasons and not just to benefit from exemptions under India’s tax treaties with other countries.

– India also said investors who meet so-called limitation of benefits criteria for individual tax treaties would be exempt from GAAR.

– Limitation of benefits seeks to ensure foreign companies or investors based in countries with special tax treaties with India meet certain criteria such as minimum level of investment and a commercial presence in the relevant jurisdiction. Read more

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