India: Pre-2017 Investments Exempt from Anti-Tax Laws

The Central Board of Direct Taxes (CBDT) has clarified that anti-tax avoidance laws will not apply to investments made before April 2017, providing relief to global venture capital (VC) and private equity (PE) firms.

In a gazette note dated March 31, the finance ministry stated that gains from investments made before April 2017 will not be subject to scrutiny under the country’s anti-tax avoidance rules, aimed at curbing aggressive tax planning and evasion. The new norms, under the Income Tax (Amendment) Rules, 2026, took effect from April 1.

The amendments specify that the general anti-avoidance rules will apply to any arrangement, regardless of its entry date, concerning tax benefits obtained from the arrangement on or after April 1, 2017. However, this excludes income accruing from the transfer of investments made before April 1, 2017.

These rules are expected to alleviate concerns about retrospective taxation and allow investors to seek tax benefits from pre-2017 transactions. The move comes after the Supreme Court (SC) ruled against Tiger Global in a tax liability case related to its stake sale in Flipkart in 2018. The SC had ruled that Tiger Global was liable for taxes on capital gains from the $1.6 billion share sale to Walmart.

The issue stemmed from Tiger Global’s Flipkart investment via its Mauritius-based entity, Tiger Global International III Holdings. When Walmart acquired a 77% stake in Flipkart in 2018, Tiger Global argued it was not liable for capital gains tax due to the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius.

Indian tax authorities rejected this argument, claiming the Mauritius-based entities were fronts for tax avoidance and that the ultimate beneficiary was Tiger Global’s US-based parent company. India had amended the DTAA treaty with Mauritius in 2016, declaring foreign investments made through Mauritius after April 2017 as tax deductible. Tiger Global contended that its investment predated this cutoff date and was therefore exempt.

In 2020, the Authority for Advance Rulings (AAR) denied DTAA benefits to Tiger Global, citing tax-saving motives. While the Delhi High Court (HC) overturned this decision in 2024, the SC stayed the HC ruling last year and later set it aside earlier this year. With these latest amendments, Tiger Global appears to be relieved from this tax liability.