The investigation wing of the Income Tax (I-T) department is understood to have recommended the invocation of General Anti-Avoidance Rules (GAAR) to deny tax benefits claimed by Jane Street under the India-Singapore treaty. It has been suggested that the profit recorded by the group during the period reviewed by the Securities & Exchange Board of India (Sebi) should be liable to be taxed in India as capital gains.
The report’s findings following a survey action on the company and its related entities have been shared with Central Board of Direct Taxes, sources told ET. “…the report is now with the Central Circle (of the I-T department), which will follow the requisite process to raise the demand,” a source added.
Panel Nod Must
Any demand triggered by suspicion of anti-avoidance regulations requires a green signal from the GAAR panel which acts as an agency that maintains checks and balances. And, before a matter is referred to the panel, the assessing officer has to receive a go-ahead from the senior-most official in the tax circle.
Jane Street, according to Sebi, had allegedly used its outfits in India to take positions in cash and stock futures markets while its Singapore and Hong Kong entities, which are registered foreign portfolio investors (FPIs), took large positions in equity options. Most of the profit was booked in the Singapore FPI which paid no tax on the earnings from equity derivatives (futures and options trades) by virtue of the India-Singapore tax treaty, which is very similar to the one India has with Mauritius. The Indian entities (JSI Investments and JSI2 Investments) allegedly took intra-day positions to influence prices, while the two FPIs (often taking opposite positions) made a killing.
“…the probe revealed that most of the business was carried out in Hong Kong, while the Singapore arm was used for treaty benefits. The Indian entities were found to be booking losses too. This arrangement was done to avoid taxes in India,” a senior government official told ET.
Thus, the tax office, in applying GAAR, could challenge the tax exemption on the derivatives trade booked by Jane Singapore on the back of the treaty. Under GAAR, any setup that lacks “commercial substance” or exists mainly to evade taxes can be reversed by the tax department.Tax officials could then build their argument on the allegation that Jane’s Indian entities were used to execute trades to bypass the restrictions on FPIs on intra-day cash equity trades. This could be construed as an “impermissible avoidance arrangement” used to sidestep FPI regulations.
At one stage Jane had allegedly refused to cooperate with investigators when the tax department sought access to data and servers which were located outside India. “…However, subsequently it did share some information but has been evasive on certain aspects,” said a senior government official.
Around mid last year Sebi had directed Jane Street Group to deposit ₹4,843.5 crore of “unlawful gains” in an interest-bearing escrow account with a lien marked in favour of Sebi. After a brief ban on trading, Sebi allowed Jane Street in July ‘25 to trade in the Indian market while directing exchanges to keep a close watch on the firm’s activities.
A Jane Street spokesperson declined to comment.