Tax Dept Sends Notice to Jane Street Over ₹20,000 Crore Gains: Singapore Treaty Benefit Under Scanner

The Income Tax Department has tightened scrutiny on global trading firm Jane Street, issuing a draft notice questioning its use of Singapore tax treaty benefits on derivative market gains worth nearly ₹20,000 crore.

As per news reports from Moneycontrol, the notice, sent on March 31, seeks an explanation on why treaty benefits under the India-Singapore agreement should not be denied for gains reported over the past four to five years.

Treaty Benefit Under Lens: ₹7,000 Crore Exposure

If the tax department denies treaty benefits, Jane Street could face a potential tax outgo of around ₹7,000 crore. The case centres on whether the firm’s Singapore entity qualifies for tax exemptions under the Double Tax Avoidance Agreement (DTAA).

Under the current India-Singapore DTAA, certain foreign portfolio investors (FPIs) are exempt from paying tax in India on derivative gains. However, authorities are examining whether these gains should instead be treated as taxable short-term capital gains.

Allegations of Base Shifting and Lack of Substance

According to the report, the tax department has alleged that Jane Street shifted its base from Hong Kong to Singapore after FY20 primarily to avail tax benefits. It has also questioned the commercial substance of the Singapore entity.

Officials have reportedly argued that key trading operations may still be conducted from Hong Kong, while tax benefits are being claimed through Singapore. Jane Street, however, maintains that the relocation was driven by operational challenges during COVID-19 lockdowns in Hong Kong.

The firm holds multiple FPI licences across jurisdictions, including London, Hong Kong, and Singapore, and also operates in India as a trading member on stock exchanges.

Regulatory Pressure Intensifies

The tax notice adds to mounting regulatory scrutiny. Securities and Exchange Board of India (SEBI) had earlier issued an impounding order of ₹4,843 crore against the firm over alleged market manipulation. Additionally, the Income Tax Department had conducted searches on certain market entities linked to the firm in July 2025.

Read more: SBI Card Revises Late Payment Charges from May 1, 2026: Fees Up for Small Dues.

Conclusion

The Jane Street case highlights increasing regulatory focus on cross-border tax structures and treaty usage. With significant tax implications and ongoing investigations, the outcome could set a precedent for how foreign investors structure their operations and claim treaty benefits in India’s derivative markets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.