A company spokesman said it was cooperating with the probe, although he could not elaborate on what local authorities were looking for. The Chennai plant is one of Nokia's biggest facilities.

A senior Indian tax official said the investigation related to allegations that the company may have evaded around 30 billion rupees ($543 million) in taxes.

"We are suspecting a default in TDS (tax deducted at source) on payments to other countries against software supplies," said the Indian tax official, who declined to be named.

Nokia shares fell 2.3 percent to 3.20 euros by 1142 GMT.

India's finance minister, P. Chidambaram, has vowed to clamp down on tax evasion to help the country plug a widening fiscal deficit.

In November, a junior finance minister said India was investigating the local unit of chocolate maker Cadbury over taxes.