A new set of tax norms, the General Anti-Avoidance Rules ( GAAR) comes into effect in INDIA from next week (April 1, 2012). Under this, the income tax department will have the power to deny individuals and entities the benefits of any tax avoidance treaty that may presently exist.  P-notes are fundamentally instruments that help foreign investors preserve their anonymity since they don’t have to register with the market regulator Sebi. It also presents them with a great opportunity to save tax by routing the investments through tax havens like Mauritius.

If the INCOME TAX department were to actually go after P-notes, there would be tax implication on these instruments which are mainly sold by the likes of investment banks like Goldman Sachs, Citi, Barclays, HSBC and Morgan Stanley among others. This week the most occupying subject in Indian Taxpayers’ mind is GAAR.


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