Jane Street Under Tax Probe For Alleged Treaty Shopping Via Mauritius; Nuvama Also Faces Scrutiny | Exclusive

The Income Tax Department is probing global trading firm Jane Street for suspected treaty shopping after the firm allegedly routed derivative trades through its Mauritius-based entity to claim capital gains tax exemption under the India–Mauritius tax treaty, according to people familiar with the matter.

Jane Street booked significant profits in futures and options trades via Mauritius while simultaneously recording losses on equity investments in Indian companies, the people said, adding that the move resulted in zero tax liability on its overall India-linked trades.

The tax probe brings renewed regulatory scrutiny to offshore routing practices and the use of tax treaties by foreign portfolio investors operating in India.

Sources said that the department believes the treaty benefit was wrongly claimed and that profits from the derivatives segment are taxable in India.

The income tax department also faced a roadblock during verification proceedings against Jane Street, according to Income Tax Department sources.

The department has flagged violations of Indian norms by Jane Street, sources told NDTV Profit. Jane Street is not cooperating with Indian tax authorities, they said, adding that the access to their servers and accounting books is blocked.

The investigation intensified on Thursday when the department surveyed the Mumbai headquarters of Nuvama Wealth, which served as Jane Street’s sole clearing and trading partner. Officials are examining why no tax was deducted at source when payments were remitted to the offshore entity.

Authorities believe Nuvama, as the clearing agent, is liable to withhold tax under Indian laws and could face recovery proceedings, the people said.

Queries sent to Nuvama and Jane Street by NDTV Profit did not yield a response at the time of publishing the story.

The case follows Jane Street disgorging nearly Rs 4,800 crore in profits last month, after which SEBI lifted a trading ban on the firm.