Online income tax services firms have included cryptocurrencies in their offerings by facilitating the disclosure of tax liabilities as investors grapple with the challenges of managing their digital holdings.
“Computing profit and loss for thousands of transactions across multiple exchanges can be a nightmare and cannot be done manually by anyone. There are also difficulties relating to incorrect/missing historical prices of cryptos traded, reconciliation with TDS paid and applying the correct tax rules to different crypto use cases,” Avinash Polepally, senior director, crypto business head, Cleartax told The Telegraph.
Gains made from trading in cryptocurrencies are taxed at 30 per cent, according to section 115BBH of the Income Tax Act. Moreover, section 194S imposes a 1 per cent tax deducted at source on the transfer of crypto assets.
Investors also cannot offset losses across different tokens, making it difficult to track net profit and loss.
This is the first year when gains on trading cryptocurrencies are required to be disclosed in the tax returns.
The tax forms already have a schedule VDA for the disclosure of income from the transfer of virtual digital assets.
“It would be tedious for chartered accountants to carry out crypto reporting manually and hence require an effective infrastructure. At the same time users were charged hefty fees to get the tax reporting done via experts, We have designed solutions to address the needs of both the CA community and crypto investors,” said Polepally.
The company has tied up with over 100 exchanges including Coinbase, CoinDCX, Binance and WazirX. It is expecting over a million filings this season.
Last month, TaxNodes, another online tax computation and assisted return platform, announced a funding of $1.6 million which would be utilised towards simplifying tax computation and providing solutions for individuals to navigate the complexities of crypto taxation.
The platform has also tied up with crypto exchanges to help users comply with tax laws and help the exchanges to increase internal controls and automate reconciliation and accounting.
The Union government had earlier stated that direct tax deducted at source from the transfer of virtual digital assets was Rs 157.9 crore up to March 20 for FY 2022-23.