I-T department eyes probe into Jane Street after SEBI ban
What's the story
The Income Tax (I-T) department is mulling a probe into US-based trading firm Jane Street, after allegations of market manipulation by the Securities and Exchange Board of India (SEBI). The probe will look into possible violations of the General Anti-Avoidance Rules (GAAR) and permanent establishment norms. It will examine the firm's structure involving Indian and offshore entities, amid concerns over potential tax evasion.
Trading operations
SEBI's findings on Jane Street
Jane Street's group structure consists of four core entities, two of which are Indian—JSI Investments and JSI2 Investments. SEBI's investigation found that Jane Street's Indian entity was involved in intraday trades in the cash segment. Meanwhile, its offshore entities based in Singapore and Hong Kong made huge profits through index option trades. This setup has raised concerns over possible violations of certain tax provisions, prompting further scrutiny from authorities.
Probe procedure
I-T dept yet to issue formal communication to Jane Street
The I-T department is yet to issue any formal communication or notice to Jane Street on this matter. An official told the ET that they are currently studying SEBI's interim order for possible income tax violations. A detailed examination of documents and accounts will take time, and if needed, entities will be asked for clarification during the probe.
Expert opinion
GAAR provisions could significantly impact Jane Street's tax liabilities
Tax experts suggest that Jane Street's structure may lack commercial substance, making it subject to GAAR provisions. These rules allow the tax department to reattribute profits earned by overseas entities to Indian ones, taxing them at rates up to 38.22%. This could have major implications for Jane Street's tax liabilities in India.