New Delhi, January 14
In a bid to attract foreign capital given the high current account deficit as well as allay the fears of overseas investors, the government announced Monday that implementation of the contentious General Anti Avoidance Rules (GAAR) have been postponed by two years to April 1, 2016.

"Having considered all the circumstances and relevant factors, the government has decided that provisions of Chapter 10A of the Income Tax Act, 1961 (dealing with GAAR) will come into force from April 1, 2016 as against April 1, 2014," Finance Minister P. Chidambaram said. The markets cheered the announcement with the BSE jumping over 242 points.

The GAAR provisions, introduced by ex-finance minister Pranab Mukherjee in the 2012-13 budget, were aimed at checking tax avoidance by overseas investors. The proposal, however was opposed by foreign investors and there was a huge fall in portfolio inflows after the budget.

The decision to postpone the implementation, Chidambaram said, follows the recommendations of the Shome committee that was set up by Prime Minister Manmohan Singh last July to look into investors’ concerns. He added the government had accepted the major recommendations of the panel with some modifications.

"The modifications that we have done are fair, non-discriminatory, just and strike a balance between interest of revenue and interest of investors. So, all apprehensions should now be set addressed," he said.