Following the budget’s proposal on crypto taxation, including 30% tax on crypto gains and a 1% tax deduction at source, questions remain around tax implication of futures and derivatives trade, loss setoff, transactions on crypto aggregators and the definition of transfer of asset class (will it include peer-to-peer, airdrop, etc.), according to experts ET spoke to.
“So, from a trading perspective, there’s a lot of clarity awaited. Right now, even crypto gain to a crypto loss appears to be a pure tax event and there is no setoff against loss. With the strictest interpretation for active traders, the tax bill itself can be bigger than the portfolio, so we are trying to understand more from the policymakers,” Clear founder Archit Gupta told ET. “This could dramatically affect trading volumes on exchanges.”
Gupta said about 50,000 customers on the platform have reported income from crypto assets so far. He anticipates as many as 10 million individuals will use the company’s services in the next six months to one year, including all prominent crypto exchanges, DeFi (decentralised finance) startups and retail investors. It has been working on developing the product offerings including software service products for exchanges for the past five months. The startup has allocated $10 million to develop its crypto taxation practice initially, which over time could go up significantly, Gupta said.
Besides Clear, other companies like BearTax offer software services to calculate taxes on crypto trading. Another platform, Catax’s Consumer and Professional (for chartered accountants), offers a taxation service for individual traders active on national and international exchanges.
Clear recently raised $75 million from investors led by Kora Capital and an additional $2-3 million from Robinhood and Coinbase product leaders. In January, the founder had shared his plans to launch new products in the Web3 space.
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Gupta said fear and worry were evident in crypto investors and “why is the tax treatment not like equities” was one of the most frequently asked questions along with “what happens if I trade on international crypto exchanges”.
Incidentally, swathes of crypto holders were expressing their discontent over the gambling-like tax regime proposed for crypto investors and the hashtag #reducecryptotax was trending on Twitter Thursday. According to an influencer intelligence firm, Qoruz, the hashtag had a combination of real people and also tweets from bots. A petition started by Aditya Singh on Change.org demanding ‘Reasonable Crypto Tax Policies’ had more than 35,000 signatures as of Thursday evening.
