Revolutionizing Crypto Taxation in India: How TaxNodes Simplifies Tax Calculations and Filing for Investors

CXOToday has engaged in an exclusive interview with Avinash Shekhar, Founder and CEO of TaxNodes

Q1- How is TaxNodes helping in calculating individual crypto tax liability?

• TaxNodes emerges as a game-changing solution empowering crypto tax users to seamlessly record, calculate, and disclose their tax liability with unparalleled accuracy. Our mission to make crypto tax computation and filing simpler and help our clients achieve a higher level of financial security. Overcoming the challenges posed by the decentralized nature of crypto transactions, TaxNodes simplifies the entire process, revolutionizing the way users manage their tax obligations.
• With seamless integration into India’s leading centralized exchanges, wallets, and support for 200 blockchains, TaxNodes facilitates effortless data synchronization. This integration enables users to generate consolidated profit and loss (P&L) statements, accurately calculating their total tax liability in strict accordance with the provisions of the Income Tax Act. By automating accounting, computations, and information disclosure, TaxNodes eliminates the need for laborious manual work, ensuring precision and reliability. Crypto investors will no longer need to struggle with tedious data collection or time-consuming tax calculations. TaxNodes offers a user-friendly interface, simplifying navigation and comprehension of tax obligations. By streamlining the process, TaxNodes empowers investors to effortlessly meet regulatory requirements, reclaiming their valuable time and efforts.
• Taxnodes provides a range of tax-related services to help individuals, businesses, and traders in the crypto and Web 3 space. In addition to its core offering of crypto taxation, Taxnodes also offers ITR filing services to assist users in filing their income tax returns accurately and in compliance with tax regulations in their respective jurisdictions. Furthermore, the platform also offers tax advisory services to provide expert guidance and support on various tax-related matters, including tax planning, compliance, and regulations in the crypto and Web 3 space. The platform’s team of tax experts works closely with users to understand their unique needs and provide customized solutions to help them stay compliant with tax regulations.

Q2- How can investors optimise their crypto tax return?

• Maximizing gains and minimizing tax liabilities is a priority for investors and strategic investment planning plays a vital role in achieving this goal. At present, there are no provisions in place for setting off or carrying forward losses, which emphasizes the need for careful investment decisions to minimize potential losses. By adopting sound investment strategies and staying informed, investors can optimize their tax liabilities and enhance their overall tax returns. Through strategic planning and prudent investment choices, investors can maximize gains while minimizing the impact of taxes, leading to a more favorable tax outcome.

Q3- What is the current state of crypto taxation in India?

• The introduction of Section 115BBH in the 2022 Union budget brought taxation on gains from cryptocurrency transactions. However, losses on cryptocurrencies cannot be offset against gains, and only the acquisition cost can be deducted for gain calculations. There is also a lack of clarity regarding the taxation of mining and staking.
• Additionally, the implementation of Section 194S, imposing a 1% TDS on each purchase transaction, has negatively impacted cryptocurrency trading on Indian exchanges. Trading volumes have significantly declined since July 2022, with exchanges experiencing a drastic decrease in activity.
• Despite the decline, Indian exchanges have contributed INR 157.9 crores to the exchequer through TDS under Section 194S. This demonstrates the industry’s compliance and commitment to supporting India’s development, even in the face of unfavorable regulations.

Q4 – How can individuals calculate tax on crypto income from foreign exchanges?

• Indian tax residents must pay taxes on their global income, including gains earned from transactions on foreign cryptocurrency exchanges. Failure to pay taxes on such gains can result in tax liability under Section 115BBH. The tax liability is calculated at a rate of 30% on the total gains earned.
• To simplify the process of calculating taxable income, individuals can utilise TaxNodes, a platform that offers user-friendly tools for crypto tax calculation and filing. By signing up and purchasing a suitable plan, individuals can efficiently compute their tax liability in just a few simple steps. TaxNodes provides a convenient solution for Indian tax residents to ensure compliance with tax regulations and accurately determine their tax obligations related to foreign crypto transactions.
• TaxNodes helps users to calculate tax liabilities with an accuracy of 99.4% + with respect to the compliance, that will further simplify crypto taxation for retail users in India as well as beyond. To ensure the completeness of data and its integrity, platform offers near real-time profit/loss computation, portfolio tracking, dashboards, and analysis. By automating these processes, TaxNodes enables investors to accurately calculate and manage their crypto taxes without the need for manual intervention.

Q5-How investors can claim TDS deducted while trading securities on the exchanges?

• According to the guidelines issued by the Income Tax department, centralized exchanges are responsible for deducting TDS (Tax Deducted at Source) under Section 194S and depositing it by the applicable due date. The TDS amount deposited is then reflected in Form 26AS and AIS. Taxpayers can claim the TDS paid as a reduction from the total tax payable when filing their income tax returns (ITRs).
• However, for decentralized exchanges, the responsibility of deducting and depositing TDS lies with the investors themselves. TDS can only be claimed as a deduction after it has been paid by the due date, TDS returns have been filed, and it is reflected in Form 26AS/AIS.
• These guidelines ensure that proper tax compliance is followed for transactions on both centralized and decentralized exchanges. It is essential for taxpayers to stay aware of their TDS obligations and accurately report and claim deductions while filing their income tax returns.