For genuine Non resident FII the General Anti Avoidance Rules (GAAR) seems to be encouraging and a harmless weapon propsed to be handed down by the finance ministry say industry observers. The propsed framework that was speculated since some time was unveiled by the Ministry on Thursday. According to the guidelines, the tax evasion rule will be invoked only in those cases where foreign investors have opted to take the benefit of tax avoidance treaties. The rules would not apply retrospectively and will be triggered only above a certain income threshold.

"If you are not operating through a post box or a letter box company then there will be no tax," hesays an official to a leading media source. The proposed GAAR that will come into effect from April 1, 2012 once the finance bill is passed clearly specifies conditions under which an arrangement will be deemed to lack commercial substance. Earlier in the day, finance secretary R.S. Gujral had stated that the draft rules will be open for industry feedback over the next 15 days.

In a nutshell GAAR announced in the Union Budget 2012 was aiming to bring tax evaders to book. This is especially to target some post box companies transacting from sop havens like Mauritius, just for avoiding taxes. GAAR has taken care of all types of transactions that are certain to be the easy route for money launderers feel industry sources.

Domestic markets responded positively to the GAAR draft annonced today say sources. The indiacation was the buying momentum in Indian stocks gained pace, with the 30-stock BSE Sensex rising over 350 points to trade firmly above the 17,000 mark. The Nifty index surged above the key 5,250 mark, gaining over 100 points. Indian markets were the biggest gainers across Asia. This is a positive impact welcoming the latest announcement, feel sources. (With inputs from internet- AW AarKay)