The income-tax (I-T) department is probing whether global proprietary trading giant Jane Street has violated India’s Place of Effective Management (POEM) rules, a tax framework aimed at curbing offshore control of Indian entities, amid allegations the firm is not cooperating with investigators, say media reports quoting people familiar with the matter.
The investigation follows a recent Securities and Exchange Board of India (SEBI) order which concluded that Jane Street’s ultimate control rests in Europe and the US. The I-T department’s focus is on whether Jane Street’s Indian operations are effectively directed from overseas which could result in significantly higher tax liabilities.
According to
a report from Moneycontrol, Jane Street is reportedly not cooperating with the tax department or the ongoing investigation. Quoting a person familiar with the development, the report says, it is premature at this stage. "Once the income tax department gets all transaction data, the books of account and their effective control and management strategy would be estimated."
A
report from Reuters says India's income-tax authorities are reviewing documents across the local offices of Jane Street and its trading partner Nuvama Wealth.
"Their servers are located outside India and access is being blocked. The books of accounts are also maintained outside the country, despite the requirement under Indian company law to maintain them in India. This has created further hurdles in the probe," a source told Reuters on condition of anonymity as the proceedings are confidential.
Introduced in 2015, POEM determines where a company is truly managed and controlled. Under Indian tax law, a domestic company is taxed at 25.17%, while a foreign company or foreign-owned and controlled company (FOCC) faces a higher rate of 35%.
POEM is designed to stop multinationals from reducing tax burdens by setting up Indian subsidiaries that are controlled from abroad. If Jane Street India is deemed an FOCC, it could face retrospective taxes along with penalties and interest.
A source told Moneycontrol that “the I-T department is trying to establish whether the Indian arm is being controlled from overseas, with real decision-making power resting with the foreign parent.”
On 31 July 2025, the I-T department conducted a survey at Nuvama Wealth Management’s premises in Mumbai. Nuvama acts as custodian for Jane Street’s Singapore-based entity. Officials reportedly seized documents related to the group’s ownership structure and decision-making processes.
However, multiple sources allege Jane Street itself is obstructing the probe.
While Jane Street may be compliant with General Anti-Avoidance Rules (GAAR) due to its physical presence in India, GAAR and POEM address different aspects of tax avoidance. GAAR focuses on preventing companies from routing investments through tax havens to avoid capital gains or royalty taxes, whereas POEM determines whether corporate control is effectively exercised from abroad, affecting corporate tax rates.
POEM forms part of India’s alignment with the OECD’s global tax norms aimed at preventing base erosion and profit shifting (BEPS). Worldwide, tech and financial sector multinationals have faced similar scrutiny for operating in low-tax jurisdictions while retaining operational control from their home countries.
After POEM was introduced, many MNCs revisited their structures to ensure compliance.
Jane Street’s Indian entity reportedly pays 10%–20% tax on derivative trades, compared to its Singapore entity, which, under the India–Singapore tax treaty, pays zero tax on derivatives.
This tax probe comes weeks after SEBI accused Jane Street of manipulating stock indices through derivatives positions. On 4 July, the market regulator barred the firm from trading in Indian markets and ordered it to deposit Rs4,843.57 crore, described as 'unlawful gains', in an escrow account.
SEBI’s interim order targeted four entities under the Jane Street group, including JSI Investments Pvt Ltd, JSI2 Investments Pvt Ltd, Jane Street Singapore Pte Ltd and Jane Street Asia Trading Ltd.
According to SEBI, the group deployed a profit-maximising strategy that booked substantial profits in index options while absorbing smaller losses in cash and futures segments.
Jane Street denied wrongdoing, calling the trades 'standard arbitrage' and reserving the right to challenge the order in court. After depositing the funds, the firm was allowed to resume trading on 21 July 2025 but remains under restrictions prohibiting any manipulative or unfair trade practices.
You may also want to read...
