Section 128 — Chapter XI relating to General Anti Avoidance Rule not to apply in certain cases

(1) The provisions of Chapter XI shall not apply to—
(a) an arrangement, where the aggregate tax benefit in the relevant tax year, to all the parties to the arrangement does not exceed a sum of three crorerupees;(b) a Foreign Institutional Investor,—(i) who is an assessee under the Act;(ii) who has not taken benefit of an agreement referred to in section 159; and(iii) who has invested in listed securities, or unlisted securities, with the prior permission of the competent authority, in accordance with theSecurities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 made under the Securities and Exchange Board ofIndia Act, 1992 (15 of 1992), in relation to such investments;(c) a person, being a non-resident, in relation to investment made by him by way of offshore derivative instruments or otherwise, directly or indirectly, in aForeign Institutional Investor;[(d) any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person form transfer of suchinvestments which were made before the 1st April, 2017 by such person.][(2) The provisions of Chapter XI shall apply to any arrangement, irrespective of the date on which it has been entered into, in respect of the tax benefitobtained from the arrangement on or after the 1st April, 2017, except for that income which accrues or arises to, or deemed to accrue or arise to, or isreceived or deemed to be received by, any person from transfer of such investments which were made before the 1st April, 2017 by such person.]
(3) For the purposes of this rule,—
(a) "Foreign Institutional Investor" shall have the meaning assigned to it in the section 210(6)(a);
(b) "offshore derivative instrument" shall have the same meaning as assigned to it in the Securities and Exchange Board of India (Foreign InstitutionalInvestors) Regulations, 1995 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);(c) "Securities and Exchange Board of India" shall have the same meaning as assigned to it in section 2(1)(a) of the Securities and Exchange Board ofIndia Act, 1992 (15 of 1992);(d) "tax benefit", as defined in section 184(11) and computed in accordance with Chapter XI, shall be with reference to—(i) section 184(11)(a) to (e), the amount of tax; and(ii) section 184(11)(f), the tax that would have been chargeable had the increase in loss referred to therein been the total income.
1. Substituted by the IT (Amdt.) Rules, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause (d) read as under:
"(d) any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person form transfer of suchinvestments made before the 1st April, 2017 by such person"
2. Substituted by the IT (Amdt.) Rules, 2026, w.e.f. 1-4-2026. Prior to its substitution, sub-rule (2) read as under: