India’s tax department has intensified scrutiny of US-based trading firm Jane Street, already under investigation by market regulator Sebi for alleged market manipulation. According to sources, the Income Tax department has recommended invoking the General Anti-Avoidance Rules (GAAR), a move that could deny the firm tax benefits claimed under the India–Singapore tax treaty.
Officials believe profits earned during the period under Sebi’s probe should be taxed in India as capital gains. The recommendation follows a survey conducted on Jane Street and its related entities, with findings shared with the Central Board of Direct Taxes. The case is now with the Central Circle, which may initiate tax demand proceedings after mandatory approvals from senior officials and a GAAR panel.
Sebi has alleged that Jane Street used Indian entities to take positions in cash and futures markets, while its Singapore and Hong Kong arms, registered as foreign portfolio investors, booked large profits in equity options. Most gains were routed through Singapore, where equity derivatives profits are tax-exempt under the treaty, while Indian entities reportedly booked losses.
Tax authorities may argue the structure lacked commercial substance and was designed primarily to avoid Indian taxes. Earlier, Sebi had directed Jane Street to deposit ₹4,843.5 crore of alleged unlawful gains into an escrow account and continues to closely monitor its trading activities.
India’s Tax Authorities Target Jane Street After Sebi Probe, GAAR Action on Singapore Profits
