MetaCharcha Business Desk | August 5, 2025
Mumbai — India’s Income Tax Department has initiated a high-level investigation into global trading giant Jane Street over alleged misuse of international tax treaties to avoid tax in India. According to reliable sources, the probe focuses on whether the firm routed profits through low-tax jurisdictions like Singapore and Hong Kong to evade domestic tax liabilities.
This investigation comes amid ongoing regulatory heat, as the Securities and Exchange Board of India (SEBI) had earlier accused Jane Street of manipulating the Indian derivatives market and making illegitimate gains of over ₹4,843 crore ($4 billion) through its Indian subsidiaries.
📌 What’s Under the Scanner?
Between January 2023 and May 2025, Jane Street reportedly earned:
- ₹3,967 crore ($448 million) via Indian entities
- ₹25,600 crore ($2.92 billion) via Singapore
- ₹6,930 crore ($789 million) via Hong Kong
India’s tax authorities suspect that Jane Street structured its operations primarily to exploit Double Taxation Avoidance Agreements (DTAAs) — violating General Anti‑Avoidance Rules (GAAR). If proven, offshore profits could be reclassified under Indian entities and taxed at up to 38.22%.
⚖️ POEM & FOCC: Control and Management in India?
The probe also explores whether Jane Street’s Place of Effective Management (POEM) was actually in India, despite the company claiming otherwise. If Indian authorities establish this, Jane Street’s local units could be treated as Foreign-Owned and Controlled Companies (FOCCs), attracting a 35% tax rate.
Reports also suggest that crucial data was hosted overseas and Indian staff lacked access or authority — a possible breach of Indian compliance norms.
🔍 Linked Entities: Nuvama Surveyed
As part of the investigation, the tax department conducted a Section 133A survey on Nuvama Wealth Management, a broker allegedly linked to Jane Street’s market operations. While no seizures were made, officials reviewed trading records and financial documentation. Nuvama confirmed it is cooperating with authorities and business remains unaffected.
🤝 Cooperation Issues & Market Impact
According to a government source quoted by Reuters, Jane Street has been uncooperative in providing requested information, slowing the investigation. The firm’s opaque structure and offshore data handling have raised red flags.
Market sentiment reflected this tension — Nuvama’s stock plunged 6.5% in two days as investors reacted to news of tax scrutiny.
📢 SEBI Calls for Derivatives Market Reform
In the aftermath of the Jane Street scandal, SEBI has called for structural reforms in India’s derivatives market. The regulator aims to plug loopholes and ensure greater transparency, particularly to protect retail investors from high-frequency and algorithmic trading abuses.
🔮 What Lies Ahead?
- Jane Street may face tax reassessments under GAAR and POEM frameworks
- Additional penalties and interest could be imposed if treaty misuse is confirmed
- Other foreign algorithmic trading firms may come under surveillance
- India may tighten compliance for offshore entities operating in its markets
Stay tuned to MetaCharcha for verified updates and expert analysis on India’s financial markets, regulatory actions, and global business developments.