Section 95 → Section 194
Applicability of General Anti-Avoidance Rule (GAAR)
Quick Answer
Section 95 of the Income Tax Act, 1961 (Applicability of General Anti-Avoidance Rule (GAAR)) corresponds to Section 194 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 95
The starting point is Section 95 of the Income Tax Act, 1961 — applicability of general anti-avoidance rule (GAAR). Declares that any arrangement entered into by an assessee may be declared an 'impermissible avoidance arrangement' and the tax consequences determined accordingly.
The new code maps this to Section 194: the provision is retained and renumbered as Section 194 of the Income-tax Act, 2025, applying from 1st April 2026. Retained as the ultimate anti-abuse weapon of the Income Tax Department. Overrides all other provisions of the Act.
On the ground, changes to Section 95 carry a Critical impact. Gives sweeping powers to the tax department to pierce corporate veils and ignore complex legal structures.
Sec 95
Provision Summary
Declares that any arrangement entered into by an assessee may be declared an 'impermissible avoidance arrangement' and the tax consequences determined accordingly.
Sec 194
Provision Summary
Retained as the ultimate anti-abuse weapon of the Income Tax Department. Overrides all other provisions of the Act.
Key Changes & Highlights
- The threshold of Rs. 3 Crore tax benefit for triggering GAAR remains intact.
Related Sections
Frequently Asked Questions
What does Section 95 of the Income Tax Act 1961 deal with?
Section 95 of the Income Tax Act, 1961 covers applicability of general anti-avoidance rule (GAAR). Declares that any arrangement entered into by an assessee may be declared an 'impermissible avoidance arrangement' and the tax consequences determined accordingly.
Where does Section 95 of the ITA 1961 go under the Income-tax Act, 2025?
Section 95 of the Income Tax Act, 1961 maps to Section 194 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained as the ultimate anti-abuse weapon of the Income Tax Department. Overrides all other provisions of the Act.
Why does the change to Section 95 matter for taxpayers?
The transition impact for Section 95 is rated Critical. Gives sweeping powers to the tax department to pierce corporate veils and ignore complex legal structures.
What are the key changes to Section 95 under the Income-tax Act, 2025?
The threshold of Rs. 3 Crore tax benefit for triggering GAAR remains intact. These points are specific to Section 95 (Applicability of General Anti-Avoidance Rule (GAAR)).
Disclaimer: This mapping of Section 95 (Applicability of General Anti-Avoidance Rule (GAAR)) to Section 194 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 95 is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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