WazirX, the Indian crypto exchange, announced its partnership with Singapore-based TaxNodes on Tuesday, May 2. The aim of this partnership is to allow WazirX users to compute their crypto taxes in India and file their taxes on a timely basis. The move is intended to simplify the understanding for investors on how taxes are computed on crypto gains as per the Indian laws. While other platforms like KoinX are already providing crypto tax related services in the southern-Asian nation, international players like TaxNodes are grabbing the opportunity to expand their services in India, where crypto gains are taxed by 30 percent.
Filing taxes is already an intricate process. Crypto investors, given their inexperience on dealing with taxes on crypto profits, have found themselves confused about the right way to go in terms of this process in India in the last one year.
“The partnership between WazirX and TaxNodes will be beneficial in enabling an ecosystem of regulatory abidance and mainstream adoption of crypto without the challenges of tax miscalculation or default,” said Rajagopal Menon, Vice President, WazirX, said in a prepared statement on Tuesday.
In addition to the 30 percent tax levied by India on all crypto profits, Indians since last June began to see one percent tax deductions on each crypto transaction. This essentially means that one percent TDS is being levied on every step around the purchase, trade, and deposit of crypto assets.
In the backdrop of these taxes being introduced to keep tracks of the otherwise largely anonymous crypto transactions, only 0.07 percent of Indian crypto owners actually declared and paid their taxes in the year of 2022.
This finding was published in early April by Divly, a Sweden-based tech research firm, that also claimed that on a global level just 0.53 percent owners declared their crypto holdings to their local authorities last year.
Since crypto transactions are private and do not disclose information about the sender or receiver of the funds, governments around the world fear that these digital assets could be misused by notorious miscreants to launder illegal money and anonymously finance international terror.
Taxing crypto activities provides the regulators with some information on where suspicious funds could have originated from and wired to via crypto.
Speaking to Gadgets 360 last year in December, KoinX CEO Punit Agarwal had said that as more investors begin to pay taxes, the Indian government could become more accepting towards the crypto sector altogether.
In the last nine months, the TDS collected from crypto tax in India amounted to over $19 million (roughly Rs. 157 crore). The detail was disclosed to the Parliament recently by Pankaj Chaudhary, who is the Minister of State for Finance in the country.
It is estimated that India’s crypto circle could swell to over 156 million users by the end of 2023.
Owing to the confusions surrounding the taxes on crypto gains in India, it is rather alarming that only around 100,000 crypto holders declared their holdings and paid the due tax amount in India last year if Divly’s report is to be believed.
Industry players are looking to increase the number of crypto taxpayers in India, that could usher more wide-spread adoption of the new-age fintech and investment tools that cryptocurrencies are.
“We are sure that our end-to-end solutions will help WazirX’s huge customer base, get the much-needed clarity on the taxes levied on their investment. We are confident that our users will be able to leverage our expert-assisted plans to not only compute but also file their taxes, thereby enabling us to simplify the taxation journey of every crypto investor in the country,” Avinash Shekhar, Founder & CEO, TaxNodes, said commenting on the partnership with WazirX.