Jane Street Update: Tax Department Moves to Apply GAAR on Jane Street Over India Singapore Treaty

Jane Street, a US‑based investment firm, is under scrutiny as the Income Tax department prepares to apply the General Anti‑Avoidance Rules (GAAR) to transactions that leveraged the India Singapore tax treaty, as per news report. 

GAAR Recommendation and Approval Process 

The investigation wing of the Income Tax department has submitted a report recommending GAAR invocation to deny treaty‑based tax exemptions claimed by Jane Street.  

Any demand under GAAR requires clearance from the GAAR panel, and the assessing officer must first obtain approval from the senior official in the tax circle before the matter is referred to the panel. 

Structure of Jane Street’s Indian and Foreign Entities 

According to SEBI findings, Jane Street used two Indian entities – JSI Investments and JSI2 Investments – to take intraday positions in cash and stock futures markets.  

Its Singapore and Hong Kong arms, registered as foreign portfolio investors, held large positions in equity options.  

Most profits were booked by the Singapore FPI, which claimed exemption from tax on derivatives earnings under the India Singapore treaty, a provision similar to the Mauritius treaty. 

Read More: Finance Bill 2026 Tightens Rules for Updated Income‑Tax Returns Amid Reassessments! 

Potential Tax Implications 

The tax department argues that the arrangement lacks commercial substance and was primarily designed to avoid Indian tax. If GAAR is applied, the profit recorded during the SEBI‑reviewed period could be treated as capital gains liable for tax in India, overturning the treaty exemption. 

SEBI Actions and Escrow Deposit 

In mid‑2025, SEBI ordered Jane Street to deposit ₹4,843.5 crore of alleged unlawful gains in an interest‑bearing escrow account with a lien in favour of SEBI. After a brief trading ban, SEBI permitted the firm to resume trading in July 2025, subject to close monitoring by exchanges. 

Conclusion 

The tax department’s GAAR recommendation targets the treaty‑based tax benefits claimed by Jane Street’s Singapore arm. The outcome will depend on the GAAR panel’s assessment of commercial substance and the validity of the treaty exemption. 

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