GAAR grandfathering restored after Tiger Global ruling

TL;DR

Khaitan & Co lawyers analyse CBDT notification amending Rule 10U to exempt income from transfers of pre-April 1, 2017 investments from GAAR.
Notification 54/2026 dated March 31 restores full grandfathering protection despite Supreme Court Tiger Global ruling on post-2017 tax benefits.[[1]](https://a2ztaxcorp.net/tax-dept-to-resume-tiger-global-reassessment-says-gaar-relief-wont-alter-sc-ruling)[[2]](https://asbanka.com/2026/04/06/cbdt-gaar-notifications-54-and-55-of-2026-why-pre-2017-foreign-investors-in-your-startup-just-got-a-major-shield)
Provides tax certainty for legacy foreign investments in India routed through Mauritius, but may not affect Tiger Global proceedings.[[3]](https://cfo.economictimes.indiatimes.com/news/tax-legal-accounting/cbdts-gaar-grandfathering-clarification-implications-for-capital-gains-and-investment-structures/129967369)

The story at a glance

Lawyers Sanjay Sanghvi and Jinisha Jain from Khaitan & Co assess a recent CBDT notification that restores GAAR grandfathering for investments made before April 1, 2017. The change addresses uncertainty from the January 15, 2026 Supreme Court judgment in Tiger Global, where GAAR was applied to a pre-2017 investment's 2018 exit yielding Rs. 14,500 crore gains.[[4]](https://www.taxmann.com/post/blog/opinion-gaar-grandfathering-restored-but-tiger-globals-sting-endures) This is reported now following the March 31, 2026 notifications, amid concerns over foreign investor confidence post-ruling.[[5]](https://www.cnbctv18.com/personal-finance/explained-cbdt-ring-fences-pre-2017-investments-from-gaar-eases-investor-jitters-after-tiger-global-ruling-ws-l-19879003.htm)

Key points

Supreme Court in Tiger Global (Civil Appeal No. 262 of 2026) held GAAR applies to arrangements yielding tax benefits on or after April 1, 2017, even for pre-2017 investments lacking commercial substance.[[6]](https://indiankanoon.org/doc/16030678)
CBDT Notification No. 54/2026 amends Rule 10U(1)(d) of Income-tax Rules, 1962, to exclude GAAR for income from transfer of pre-April 1, 2017 investments, effective March 31, 2026.[[2]](https://asbanka.com/2026/04/06/cbdt-gaar-notifications-54-and-55-of-2026-why-pre-2017-foreign-investors-in-your-startup-just-got-a-major-shield)
Parallel Notification No. 55/2026 amends Rule 128 of Income-tax Rules, 2026, effective April 1, 2026, for consistency under new tax regime.[[2]](https://asbanka.com/2026/04/06/cbdt-gaar-notifications-54-and-55-of-2026-why-pre-2017-foreign-investors-in-your-startup-just-got-a-major-shield)
Protects legacy Mauritius-routed investments from GAAR scrutiny on exits, reinforcing original intent when GAAR was introduced in 2017.[[7]](https://www.caalley.com/news-updates/indian-news/tiger-global-ruling-concerns-cbdt-exempts-pre-fy18-investments-from-gaar)
Does not override substance tests or judicial anti-avoidance; tax authorities signal it won't alter Tiger Global reassessment.[[1]](https://a2ztaxcorp.net/tax-dept-to-resume-tiger-global-reassessment-says-gaar-relief-wont-alter-sc-ruling)

Details and context

The Tiger Global case involved Mauritius entities selling Singapore shares in Flipkart (invested 2011-2015) to Walmart in 2018, claiming India-Mauritius treaty exemption under grandfathering in Article 13(3A). The Supreme Court ruled the structure was an impermissible avoidance arrangement under GAAR, as TRCs do not preclude substance probes and Rule 10U(2) allowed GAAR for post-2017 benefits.[[8]](https://www.alvarezandmarsal.com/insights/india-tax-alert-supreme-court-redefines-tax-treaty-protection-gaar-trumps-dtaa-in-indirect-transfers)

CBDT's amendments carve out such legacy transfer income explicitly from Chapter X-A (GAAR), aiming to stabilise investor sentiment after the ruling dented confidence in offshore structures.[[9]](https://legal.economictimes.indiatimes.com/news/law-policy/gaar-notification-provides-partial-relief-for-legacy-investments-in-india/130108578) This applies prospectively from notification date but clarifies non-retrospective GAAR intent.

Uncertainties persist on retrospective effect, applicability to pending cases like Tiger Global, and potential use of judicial anti-avoidance rules.[[10]](https://www.linkedin.com/posts/sanjay-sanghvi-b1160417_ergo-gaar-cbdt-notification-2-april-activity-7446152964580360192-rCep)

Key quotes

None reliably sourced from the article.

Why it matters

The change balances anti-abuse measures with stability for India's $171 billion FDI inflows, particularly legacy PE/VC holdings via Mauritius.

Foreign investors with pre-2017 stakes gain clearer exit tax positions, reducing GAAR litigation risk for genuine structures.

Watch CBDT clarifications on pending disputes, court interpretations of notification scope, and tax authority use of substance/JAAR tests.