Indian Chartered Accountants Must Track, Analyse Blockchain Records: KoinX CEO

In India, using cryptocurrencies as a mode of payments in day-to-day retail purchases, has not quite picked up pace as compared to other nations like the US. It is however, noteworthy, that some business owners here, have begun experimenting with crypto payments and contribute substantially to the number of transactions being recorded on blockchain networks operational in the country. Before crypto activities explode in full potential, chartered accountants (CAs) in India must begin to dive deeper into blockchain records.

The ‘need-of-the-hour’ was highlighted by Punit Agarwal, the founder and CEO of KoinX, which is an automated crypto taxation platform.

“Because of the taxation introduced this year on crypto trades, Indian CAs must adapt to keep up with the changing standards of the current financial industry in the nation,” said Agarwal, in conversation with Gadgets 360.

“The policymaking and provisioning around the industry require CAs to work on assessing the economic interpretation of blockchain records. This includes keeping detailed records of crypto transactions, understanding the regulations, and, of course, valuing cryptocurrencies as either capital property or inventory.”

Earlier this year, when the Indian finance ministry included crypto transactions under a tax regime, it justified its decision saying that the deed would bring an element of traceability for crypto transactions, that are otherwise largely anonymous.

In India, all profits churned from crypto transactions are being taxed at 30 percent since April and a 1 percent tax deducted at source (TDS) for crypto transactions has also been live in India since July.

Businesses that are experimenting with crypto transactions, like the famous teaseller in Bengaluru, have complained about not seeing any profits after tax deductions.

Around June, the average daily transaction volume on Indian exchanges WazirX, CoinDCX, BitBNS, and Zebpay had dipped to $5.6 million (roughly Rs. 44 crore) in August. Up until June, this volume was around $10 million (roughly Rs. 80 crore).

Levying taxes on crypto contributed Rs. 60.46 crore to India’s economy between July and December, Pankaj Chaudhary, the Minister of State for Finance, recently revealed in the Rajya Sabha.

However, India’s Web3 watch body called the Bharat Web3 Association (BWA), met with senior officials from India’s finance ministry to review and voice concerns about India’s crypto-related policies and judgement.

During the discussion, representatives from BWA noted that India’s ‘unfriendly’ taxation on crypto gains is hindering the overall growth of the sector.

Commenting on the situation, Agarwal has predicted that in the long run, India could consider a reduction in its crypto taxes from the current 30 percent.

“Rather than reconsidering the decision of taxation, what seems important is the fact that how the industry will progress further, especially as it gets more regulated. However, as this industry becomes more established in the mainstream, the government may be willing to relax the 30 percent tax and 1 percent TDS in the future,” the industry expert predicted.

Following a severe backlash from its crypto community in February, Thailand had resorted to rolling back its 15 percent tax on financial profits fetched out of the trading and mining of digital assets.

Meanwhile, crypto firms like Coinbase and Polygon among others, have time and again expressed, the uneasiness that prevails to establish a crypto business in India. In April, rumours around Indian exchange WazirX moving its head office to Dubai had also made it to the headlines.

“The 1 percent TDS has already poured more than $7 million (roughly Rs. 58 lakh) out of the crypto markets since June. This could also be a reason for certain crypto businesses to find options outside the country or leave altogether because of the lower liquidity in the markets,” the KoinX chief highlighted.

For now, a large part of India’s crypto decisions remain awaited.

India, while its working on drafting laws to govern the digital assets sector, has not yet clarified its outlook on virtual digital assets.

For now, the Income Tax Department of India views Bitcoin and other cryptocurrencies as tools for investments, rather than standalone currencies, Agarwal noted.

Under its G20 Presidency, India aims to work with other nations to come up with policies that would streamline the crypto sector working on an international level.

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