International Tax Planning in India After Tiger Global: GAAR, PPT and POEM

Legal position as at 29 October 2026

For years, a holding company in a treaty jurisdiction, a tax residency certificate (TRC) and board meetings held abroad were treated as enough to secure treaty benefits on an Indian exit. 2026 ended that assumption. In January, the Supreme Court denied Tiger Global's Mauritius entities treaty relief on their Flipkart exit. In March, the CBDT amended the GAAR rules to restore protection for investments made before 1 April 2017. In August, a protocol adding a principal purpose test (PPT) to the India–Mauritius treaty came into force.

This article sets out the four tests an Indian cross-border structure now has to pass (GAAR, treaty entitlement, place of effective management and grandfathering) and what each one does and does not protect. It refers to the Income-tax Act, 2025 and the Income-tax Rules, 2026, which apply from tax year 2026-27. Earlier years remain under the Income-tax Act, 1961 and its Rules.

What the Supreme Court decided in Tiger Global

In Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings (2026 INSC 60, decided on 15 January 2026), Mauritius entities had sold shares of Flipkart Private Limited, a Singapore company whose value came substantially from Indian assets, to a Walmart group company in 2018. They claimed the capital gains were exempt under the India–Mauritius treaty.

The Court upheld the Authority for Advance Rulings' refusal to admit the applications, on the ground that the arrangement was prima facie designed to avoid tax. It then went further and dealt with the merits (IBFD summary):

• A TRC is an eligibility condition, not conclusive proof. The tax authorities can examine where control and management actually sit and whether the entity has commercial substance.
• The gains were taxable in India under the indirect-transfer provisions of the 1961 Act, because the Singapore shares derived their value substantially from Indian assets.
• Treaty exemption was not available on this indirect transfer, and the Court treated the structure as an impermissible avoidance arrangement.
• Grandfathering was not absolute. The Court read the GAAR rules as able to reach gains realised after 1 April 2017, even where the investment was made earlier.

The ruling turns on its facts: an indirect transfer through a Singapore company, by Mauritius entities that the Revenue showed lacked commercial substance. It does not make every Mauritius holding company a conduit. It does mean that a TRC and a tidy set of board minutes are now the start of a defence, not the end of one.

1. GAAR: the main-purpose test, applied step by step

GAAR is in Chapter XI of the Income-tax Act, 2025, starting with section 178. Under section 179, an arrangement is an impermissible avoidance arrangement only if two things are both true. Its main purpose must be to obtain a tax benefit, and it must have at least one of these "tainted elements":

• it creates rights or obligations that parties dealing at arm's length would not normally create;
• it misuses or abuses the provisions of the Act;
• it lacks commercial substance, in whole or in part (section 180 deems this in several situations); or
• it is carried out by means or in a manner not normally used for bona fide purposes.

Two features catch taxpayers out. First, the test applies step by step. If the main purpose of one step is a tax benefit, section 179(2) presumes that the whole arrangement has that purpose unless the taxpayer proves otherwise. A sound commercial rationale for the overall deal does not protect a tax-driven step inside it. Second, section 159(6) applies GAAR even where the treaty would give a better result. GAAR overrides the treaty.

If GAAR applies, section 181 allows the tax officer to disregard or recharacterise steps, look through corporate structures, ignore where a party is resident, reallocate income and expenditure, and treat equity as debt or debt as equity.

Rule 128 of the Income-tax Rules, 2026 switches GAAR off in limited cases. The main ones are arrangements where the total tax benefit to all parties in the tax year does not exceed ₹3 crore, certain foreign institutional investors and their investors, and, since 1 April 2026, income from transferring investments made before 1 April 2017 (covered in section 4 below).

What to keep on file: board and investment committee papers showing why each entity and each step exists; evidence of real staff, premises and spending in the holding jurisdiction; and records of who actually took the key decisions, and where. Prepare these when the decision is made, not when a notice arrives.

2. Treaty relief: the TRC, the PPT and the new Mauritius protocol

Section 159(8) requires a non-resident claiming treaty relief to obtain a TRC from its home jurisdiction and provide the other prescribed information. Without them, there is no relief. With them, relief is still not automatic, which is the central point of Tiger Global.

Most of India's treaties now also contain a principal purpose test, largely through the Multilateral Instrument. It denies a treaty benefit where obtaining that benefit was one of the principal purposes of an arrangement, unless granting it would be in line with the object and purpose of the treaty provision. In January 2025, the CBDT issued Circular No. 1/2025, which said the PPT applies prospectively and does not apply to the grandfathering clauses in the Cyprus, Mauritius and Singapore treaties. A March 2025 CBDT press release added that the circular does not limit GAAR, specific anti-avoidance rules or judicial anti-avoidance principles.

The Mauritius treaty has now changed. The protocol signed on 7 March 2024 entered into force on 10 August 2026 and was notified in India on 13 October 2026 (Notification No. 135/2026, S.O. 5611(E)). It:

• replaces the preamble, which now states that the treaty is not meant to create opportunities for non-taxation or reduced taxation through evasion, avoidance or treaty shopping; and
• inserts Article 27B (Entitlement to Benefits), a PPT that applies notwithstanding the treaty's other provisions.

The protocol has effect from 10 August 2026, regardless of the tax year to which the income relates (KPMG analysis).

The key open question is whether Article 27B can reach a capital gain that is grandfathered under Article 13(3A). Circular 1/2025 says the grandfathering clause is outside the PPT, and commentators read it as continuing to protect gains on shares acquired before 1 April 2017. Income from holding those shares (dividends, interest, royalties and fees for technical services) has no such protection and must pass the PPT. Until there is fresh guidance or case law, treat the treaty position on a pre-2017 Mauritius investment as arguable, not settled.

3. POEM: where are decisions actually taken?

Under section 6(10), a company is resident in India for a tax year if it is an Indian company or if its place of effective management (POEM) is in India in that year. POEM is where the key management and commercial decisions needed for the business as a whole are, in substance, made. A foreign subsidiary run from India can therefore be taxed in India on its worldwide income.

The CBDT's guidance, Circular No. 6/2017, first asks whether the company carries on an active business outside India. It does if all four of these conditions are met:

• passive income is not more than 50% of total income;
• less than 50% of its total assets are in India;
• less than 50% of its employees are in India or resident in India; and
• less than 50% of its payroll expense relates to those employees.

For a company with an active business outside India, POEM is presumed to be outside India if the majority of its board meetings are held outside India. The presumption fails if the board is not really exercising its powers, for example where it only ratifies decisions already taken by an Indian parent or by executives based in India. For other companies, the circular first identifies the persons who actually make the key decisions and then looks at where those decisions are in fact made.

Circular No. 8/2017 takes companies with turnover or gross receipts of ₹50 crore or less in a financial year outside the POEM guidance. Both circulars were issued under the 1961 Act. Before relying on them for tax year 2026-27 onwards, confirm that the CBDT has not replaced them.

4. Grandfathering after the March 2026 amendments

Tiger Global's reading of the GAAR rules alarmed investors with pre-2017 positions. On 31 March 2026 the CBDT responded with two parallel notifications (EY summary):

• Notification No. 54/2026 amended Rule 10U of the Income-tax Rules, 1962, for years still governed by the 1961 Act.
• Notification No. 55/2026 (official text) amended Rule 128 of the Income-tax Rules, 2026, with effect from 1 April 2026.

Under both, GAAR does not apply to income from the transfer of investments made before 1 April 2017 by the same person. For every other arrangement, GAAR applies to any tax benefit obtained on or after 1 April 2017, whenever the arrangement was entered into.

The relief is narrower than it first looks:

• It covers only income from the transfer of the investment. Dividends, interest and other income from holding it remain exposed to GAAR.
• It protects only the person who made the investment. A buyer of that investment does not inherit the protection.
• It removes GAAR only. Treaty entitlement still depends on the treaty text, including Article 27B for Mauritius.
• It does not displace judicial anti-avoidance principles, which the Supreme Court also relied on.

A worked example

A Mauritius company bought shares in an Indian private company in 2015. It sells them in tax year 2026-27, after the protocol came into force, and it also received a dividend from the company that year.

Change one fact, so that the Mauritius company holds shares in a Singapore company that owns the Indian business, as in Tiger Global, and the treaty analysis changes. Article 13(3A) covers only shares of a company resident in India, and the Supreme Court has refused treaty exemption on an indirect transfer of this kind. The GAAR exclusion may still help, but treaty relief cannot be assumed.

Checklist for existing structures

• Map every holding entity and record, with evidence from the time, why it exists and what it does.
• Check where key decisions are actually taken: who approves, who signs, who controls the bank mandates, and where those people are.
• Confirm that TRCs and the information prescribed under section 159(8) are current for every treaty claim.
• For Mauritius structures, test each income stream against Article 27B from 10 August 2026, not only against Circular 1/2025.
• Analyse the GAAR exclusion for pre-2017 investments separately from treaty entitlement.
• Test foreign subsidiaries that are managed from India against the POEM rules.
• Review before an exit, restructuring or dividend, not after a notice arrives.

The bottom line

International tax planning is still lawful. What has changed is what it takes to defend it. After Tiger Global, a structure needs evidence of substance and real decision-making, and each income stream needs its own analysis under GAAR, the treaty and the residence rules. AskSolique traces each of these questions to the relevant section, treaty article, circular and judgment, so the analysis starts from the primary source. For a live transaction, confirm the current text and take advice on the facts.

This article is general information based on the law as at 29 October 2026. It is not advice on any specific structure or transaction. GAAR, treaty entitlement and residence depend on the facts, the treaty text and the tax year concerned.

Related reading

• Tax on International Transactions: What Section 163 of the Income-tax Act, 2025 Covers
• Pillar Two for Indian Groups: International Tax Compliance Without a Domestic Global Minimum Tax
• GIFT City for Non-Residents and Foreign Entities: FEMA, Tax and Structuring

Sources and further reading

Links point to the official text wherever it is available online. Check that each link opens before publishing.

• Supreme Court: AAR (Income Tax) v. Tiger Global International II Holdings, 2026 INSC 60 (15 January 2026)
• IBFD: summary of the Tiger Global judgment
• Income-tax Act, 2025: section 178 (applicability of GAAR)
• Income-tax Act, 2025: section 179 (impermissible avoidance arrangement)
• Income-tax Act, 2025: section 181 (consequences of impermissible avoidance arrangement)
• Income-tax Act, 2025: section 159 (treaty relief, including sub-sections (6) and (8))
• Income-tax Act, 2025: section 6 (residence, including POEM)
• Income-tax Rules, 2026: Rule 128 (GAAR exclusions)
• CBDT Notification No. 55/2026 (31 March 2026), amending Rule 128
• EY: CBDT Notifications No. 54/2026 and 55/2026 on GAAR grandfathering
• Income Tax Department: India–Mauritius treaty, including Notification S.O. 5611(E) of 13 October 2026
• KPMG Flash News: India–Mauritius protocol notified (14 October 2026)
• EY: CBDT Circular No. 1/2025 on the principal purpose test
• CBDT Circular No. 6/2017: POEM guiding principles
• CBDT Circular No. 8/2017: POEM turnover threshold