Section 98 → Section 197
Consequences of impermissible avoidance arrangement
Quick Answer
Section 98 of the Income Tax Act, 1961 (Consequences of impermissible avoidance arrangement) corresponds to Section 197 of the Direct Tax Code 2025 (Income-tax Act, 2025), effective 1st April 2026. Status: Retained.
Sec 98
Provision Summary
If GAAR is invoked, the AO can deny tax treaty benefits, recharacterize equity as debt (or vice versa), and disregard any corporate structure.
Sec 197
Provision Summary
Retained. The AO possesses the power to completely rewrite the transaction to reflect its true economic reality.
Key Changes & Highlights
- Treaty override power remains explicit and legally binding.
Related Sections
Frequently Asked Questions
What does Section 98 of the Income Tax Act 1961 deal with?
Section 98 (Consequences of impermissible avoidance arrangement) If GAAR is invoked, the AO can deny tax treaty benefits, recharacterize equity as debt (or vice versa), and disregard any corporate structure.
What is the new section number for Section 98 under the Direct Tax Code 2025?
Section 98 of the ITA 1961 maps to Section 197 of the Direct Tax Code 2025 (Income-tax Act, 2025), effective from 1st April 2026.
What is the status of Section 98 under the new tax code?
Section 98 is marked as "Retained" with status "Active". Impact: Critical - Severe penal and tax consequences if a taxpayer is caught under GAAR.
What are the key changes to Section 98 under DTC 2025?
Treaty override power remains explicit and legally binding.
Disclaimer: This page is for educational and reference purposes only. Section mappings are based on publicly available drafts and circulars. Always consult a qualified Chartered Accountant before filing or making compliance decisions under the Direct Tax Code 2025.
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