GAAR Applicability Checklist — Sections 96-102, Impermissible Avoidance Arrangement Test

Tests whether an arrangement risks being labelled an "impermissible avoidance arrangement" under the General Anti-Avoidance Rule — the main purpose test, the four specified tainted-arrangement features, and the monetary threshold for invoking GAAR.

Free · CORAA original — SA-aligned

Updated 28 Jul 2026

Statutory basis

Sections 96-102, Income-tax Act 1961

Core test

Main purpose (Sec 96(1)) + at least one tainted feature

Gate

CBDT-notified monetary threshold on tax benefit — verify current figure

Note

A risk-screening tool, not the Approving Panel process itself

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Your firm — letterhead

Appears at the top of the document as the audit firm letterhead.

Audit firm name

Audit firm address

Used as the letterhead block.

Engagement partner

ICAI membership no.

Firm registration no.(optional)

Engagement details

The client and period this document is for.

Name of assessee

PAN

Address of assessee

Status

Previous year ended

Assessment Year

GSTIN (if registered)(optional)

Date of report

Description of the arrangement/transaction being tested

Tax benefit obtained/claimed as a result (₹, if quantifiable)(optional)

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GAAR Applicability Checklist — Sections 96-102, Impermissible Avoidance Arrangement Test

31 July 2026

GAAR APPLICABILITY CHECKLIST

Assessee: {{client_name}} · PAN: {{client_pan}} · Assessment Year: {{assessment_year}}

Arrangement tested: {{arrangement_description}}

Tax benefit claimed:

Step 1 — Monetary threshold gate (CBDT-notified de minimis limit)

GAAR provisions do not apply where the tax benefit to all parties from the arrangement, in the relevant year, is below the CBDT-notified monetary threshold (verify the current threshold — it is a specific rupee figure, not indexed automatically). If the tax benefit above is below that threshold, GAAR does not apply and the remaining tests are not required.

Step 2 — Main purpose test (Section 96(1))

Test	Answer (Y/N)	Basis for conclusion
Was the main purpose (or one of the main purposes) of the arrangement to obtain a tax benefit?

Step 3 — Tainted-arrangement features (Section 96(1), any one triggers "impermissible")

Feature	Present? (Y/N)	Basis for conclusion
Creates rights/obligations not ordinarily created between parties dealing at arm's length
Results, directly or indirectly, in misuse or abuse of the Act's provisions
Lacks commercial substance, in whole or in part (Section 97 provides an extended definition — round-trip financing, accommodating party, offsetting/cancelling elements, disguised business purpose, or lacks significant effect on business risk/cash flow)
Is entered into, or carried out, in a manner not normally employed for bona fide purposes

Step 4 — Conclusion

If the main purpose test in Step 2 is answered "Yes" AND at least one tainted feature in Step 3 is present, the arrangement is at risk of being declared an impermissible avoidance arrangement, exposing the assessee to re-characterisation of the transaction and denial of the tax benefit under Sections 98-100. This checklist is a risk-screening tool, not a substitute for the Approving Panel reference process the Assessing Officer must follow before actually invoking GAAR.

Conclusion: ____________________________________________

Prepared by: ____________________ Reviewed by: ____________________

Date: 31 July 2026

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What’s inside

An excerpt from the template.

GAAR APPLICABILITY CHECKLIST

Assessee: ___ · PAN: ___ · Assessment Year: ___

Arrangement tested: ___

Tax benefit claimed: ___

↑ Excerpt only — the full template is what you download as Word

About this template

What you’re downloading, and when to use it.

This template follows the format published by the Institute of Chartered Accountants of India (ICAI) in the AASB Audit Working Paper Templates (June 2023), the authoritative reference for Indian statutory-audit documentation. Fill in your firm’s letterhead and the engagement details on the form above, click Download Word file, and you’ll get a fully formatted .docx ready to use.

Everything is generated in your browser and on a stateless API endpoint — no account, nothing stored on our servers. We’ll ask for a work email once before your first download so we can send you the file and the occasional relevant update; after that, downloads on this device are instant. Edit freely in Word, Google Docs or Pages before sending to your client.

Common questions

FAQs.

Does GAAR override India's tax treaties (DTAAs)?

Yes — GAAR can override treaty benefits where an arrangement is held to be an impermissible avoidance arrangement, though the interplay between GAAR and specific anti-abuse/limitation-of-benefit clauses already present in a given treaty needs to be tested on the facts of each treaty and arrangement.

Is every tax-efficient structuring exercise automatically caught by GAAR?

No — GAAR targets arrangements whose main purpose is obtaining a tax benefit AND that exhibit at least one tainted feature (lack of commercial substance, misuse of provisions, abnormal rights/obligations, or an unusual manner of execution). A transaction structured tax-efficiently but genuinely driven by commercial considerations, with commercial substance and no artificial features, should not fail the test — but this is a facts-and-circumstances judgment, not a bright-line rule.

Can an assessee get advance certainty on whether GAAR applies to a proposed arrangement?

Yes, in principle, through an application to the Authority for Advance Rulings or by seeking the Principal Commissioner's reference to the Approving Panel process contemplated under the GAAR framework — though in practice this route is used far less often than the specific advance-ruling mechanisms for other provisions; verify current procedural availability before relying on it as a planning step.

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