Income Tax Department to Invoke GAAR Against Jane Street for Alleged Tax Evasion

The Income Tax Department in India is currently investigating the US-based investment firm Jane Street for the alleged manipulation of security prices to earn illegal gains. The Department’s investigation wing has recommended using the General Anti-Avoidance Rules (GAAR) to prevent Jane Street from claiming tax benefits under the Indian-Singapore treaty.

The department further suggested that the profit recorded by the company during the period by the Securities and Exchange Board of India (SEBI) must be taxed in India as a capital gain.

This invocation of GAAR can allow the tax authorities to reject the tax benefits claimed by Jane Street under the India-Singapore tax treaty.

The findings are followed by a survey conducted on Jane Street and its related entities. These findings are shared with the Central Board of Direct Taxes (CBDT).

As per SEBI, Jane Street allegedly used its Indian outfits to take positions in cash and stock future markets while its Singapore-based entities made large profits from equity options. The majority of the profit was booked in the Singapore FPI, which did not pay tax on the earnings from the equity derivatives (F&O) by virtue of the India-Singapore tax treaty.