Foreign exchange transactions will be the subject of an investigation, according to a senior official in the finance ministry, with offices of both firms set to have their books probed for violations.
The official claimed that notices have been sent out to the Indian offices of the two companies, though further grounds for peering through the piles of tax returns have not been given yet.
It is thought though that Google has been in breach of rules on foreign transactions when sending funds over to its Irish banks, among others.
According to the Wall Street Journal, Google has not officially had an official word to say on the impending investigation. It told the WSJ that it's compliant with tax rules in all the countries in which it operates. Yahoo has not commented.
The news of a tax-probe is piling on problems for the two, who would be forgiven for thinking the authorities have it in for them at the moment.
The pair, among others, have come under fire from Indian courts over posting what has been described as ‘controversial content’.
Google, Yahoo and others such as Facebook had refused to remove online content which was deemed to be offensive by Indian legal eagles.Google has since agreed to take down the content, which has riled certain members of the public, from its Indian services.
Another court case will also go ahead which will decide whether the host of firms can be held responsible for offensive content found online. An appeal against curbing web freedoms will go ahead tomorrow.
Censorship concerns were also raised in Iran over the weekend, after Google and Yahoo’s email services were cut off. Logins to popular email services such as Hotmail and Gmail were mysteriously cut off on Thursday due to what is thought to be more interference by government authorities.