CBDT Amends Income-Tax Rules 2026 to Exclude Pre-2017 Investments from GAAR

The Ministry of Finance (Department of Revenue) issued a notification dated 31st March, 2026, announcing some changes made to the Income-tax Rules, 2026, effective from April 1, 2026. The notification amends Rule 128 of the Income Tax Rules, 2026, to clarify the tax treatment of income arising from investments made before April 1, 2026. Now, the income from the transfer of investments made before April 1, 2017, will remain outside the scope of GAAR, no matter when the gains are realised.

These rules are revised by the Central Board of Direct Taxes (CBDT), using its power given under section 533 read with section 183 of the Income-tax Act, 2025.

As per the revision, sub-rule (1)(d) now says that the income from the Transfer of investments made before April 1, 2017, will remain excluded from the applicability of provisions of Chapter XI.

The amendment gives a “grandfathering” protection by excluding such income from the General Anti-Avoidance Rules (GAAR).

Also, sub-rule (2) has been revised to clarify that Chapter XI provisions apply to all arrangements regardless of when they were entered into, if the tax benefit arises on or after April 1, 2017. But the income from investments made before April 1, 2017, will be excluded. In other words, only the investments made on or after April 1, 2017, are subject to GAAR.

This amendment is expected to give significant relief to foreign portfolio investors, venture capital firms, and private equity funds that made investments prior to April 2017.

Refer to the official Notification for more information.