Tax treaty shopping

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Alternate Minimum TaxA floor tax on non-corporate assessees — 18.5% of adjusted total income, 15% for a co-operative society — payable when it exceeds their normal tax, with the excess carried forward as credit for 15 years.
• Bonus strippingBuying units shortly before a bonus issue and selling the originals at the halved NAV to manufacture a capital loss — a loss the Income Tax Act disallows inside a defined 3-month and 9-month window.
• GAAR testThe two-part test for an impermissible avoidance arrangement: the main purpose must be to obtain a tax benefit, and the arrangement must carry at least one of four tainted elements.
• Inter-head adjustmentSetting off a loss under one head of income against income under a different head — permitted by section 109 of the Income Tax Act, 2025, but only after intra-head set-off and subject to two bars.
• Intra-head adjustmentSetting off a loss from one source against income from another source under the same head of income — the first step of loss relief, under section 108 of the Income Tax Act, 2025.
• Maximum Marginal RateThe highest slab rate of income tax, applied to a Category III AIF's business income at fund level because the fund gets no pass-through — 30% before surcharge and cess.