Section 182 Income Tax Act 2025: How Are Connected Persons and Accommodating Parties Treated Under GAAR?

Section 182 of the Income-tax Act, 2025 explains how the tax authorities may examine connected persons, accommodating parties and corporate structures when determining whether a tax benefit exists under the General Anti-Avoidance Rule (GAAR).

Legal position: Section 182 forms part of Chapter XI (General Anti-Avoidance Rule) of the Income-tax Act, 2025, effective from 1 April 2026. It corresponds broadly to Section 99 of the Income-tax Act, 1961. The application of GAAR depends on the other statutory requirements, prescribed conditions and procedural safeguards; Section 182 does not, by itself, make every related-party transaction impermissible.

What does Section 182 provide?

In determining whether a tax benefit exists for the purposes of Chapter XI, Section 182 authorises specified ways of examining the parties and the arrangement. The focus is on the substance of participation and the resulting tax benefit, rather than solely on the legal form of intermediate entities.

What are the four treatments under Section 182?

Section 182(a): Connected persons may be treated as one person

Parties who are connected persons in relation to each other may be treated as one and the same person for the purpose of determining whether a tax benefit exists.

Section 182(b): An accommodating party may be disregarded

An intermediary whose participation meets the statutory definition of an accommodating party may be disregarded in analysing the tax benefit.

Section 182(c): Parties may be combined

An accommodating party and any other party may be treated as one and the same person for the relevant GAAR analysis.

Section 182(d): Corporate structures may be looked through

The arrangement may be examined by disregarding a corporate structure to identify the underlying tax benefit. This is a statutory analytical power, not an automatic finding that a company lacks separate legal personality for all purposes.

Key distinction: These are permitted methods of determining whether a tax benefit exists. Any final GAAR consequence must be considered with the remaining provisions of Chapter XI and applicable safeguards.

Important statutory definitions under Section 184

Accommodating party (Section 184(1)): A party whose main purpose in participating, directly or indirectly, in an arrangement, in whole or part, is to obtain a tax benefit for the assessee (apart from GAAR), whether or not that party is connected to another party.

Arrangement (Section 184(2)): Includes any step in, or part or whole of, a transaction, operation, scheme, agreement or understanding, whether enforceable or not, including alienation of property.

Connected person (Section 184(5)): Includes persons connected directly or indirectly, such as specified relatives, company directors and their relatives, partners or members, and persons or entities linked through substantial business interests. The complete statutory list should be consulted.

Substantial interest (Section 184(9)): Generally includes beneficial ownership of equity shares carrying at least 20% voting power in a company, or beneficial entitlement to at least 20% of profits in another business, at any time during the financial year.

Tax benefit (Section 184(11)): Includes specified tax reductions, avoidance or deferral, increased refunds, reduced total income or increased losses, including specified tax treaty effects.

Practical illustrations of Section 182

Example 1: Connected group companies

Company A routes an income-generating transaction through related Company B. Where the statutory conditions are met, the tax authority may examine A and B as one person to test whether a tax benefit exists. Their connection alone does not establish an impermissible avoidance arrangement.

Example 2: Intermediary without independent purpose

An intermediary is inserted into a transaction mainly to secure a tax advantage for the assessee. If the intermediary qualifies as an accommodating party, it may be disregarded or combined with another party for the Section 182 analysis.

Example 3: Multi-layer corporate arrangement

Several entities are interposed between the taxpayer and an underlying asset. Section 182(d) permits the structure to be looked through when determining whether the arrangement yields a tax benefit, subject to the overall GAAR framework.

These illustrations are simplified and do not determine the outcome of any actual assessment.

What should taxpayers document?

Commercial reasons and business substance for each entity's participation.
Ownership, control and beneficial interest of connected parties.
Contracts, board approvals, correspondence and evidence of actual performance.
Economic risks, functions and assets of intermediaries.
Analysis of tax benefits and the applicable GAAR conditions and safeguards.

Frequently asked questions

Does Section 182 prohibit transactions between related parties?

No. It permits specified treatment of connected persons when determining whether a tax benefit exists under GAAR. Other statutory tests must also be satisfied.

Can an unrelated party be an accommodating party?

Yes. Under Section 184(1), an accommodating party need not be a connected person.

Can a corporate structure be disregarded?

Section 182(d) permits a look-through analysis by disregarding corporate structure for determining whether a tax benefit exists within the GAAR framework.

Which provision in the 1961 Act corresponds to Section 182?

Section 99 of the Income-tax Act, 1961.

Official legislation and further reading

Official Income-tax Act, 2025 (as amended)Earlier Section 99 (1961 Act)Income Tax Department: New Act FAQs

Updated: 10 November 2026. This article is general legal information; the statutory text, rules and facts of each case govern.