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Crypto Taxation Success Mr. Raj's Journey with TaxBuddy

About the case

In the dynamic landscape of cryptocurrency trading and taxation in India, Taxbuddy emerges as a vital ally for individuals like Mr. Raj. This case study explores how TaxBuddy played a pivotal role in aiding Mr. Raj during the financial year 2023-24. As a salaried individual deeply involved in cryptocurrency trading, Mr. Raj faced uncertainties about the tax implications of his growing crypto portfolio. The lack of clear guidelines from tax authorities led him to seek assistance from TaxBuddy.

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Issues faced By

Mr. Raj

Unclear Taxation Guidelines:

  • Mr. Raj grappled with the lack of clear directives from Indian tax authorities regarding the treatment of cryptocurrency gains and losses. This ambiguity left him uncertain about the appropriate methodology for reporting, adding complexity to his tax obligations.

Complex Transaction Tracking:

  • The frequent buying, selling, and exchanging of various cryptocurrencies presented a significant challenge for Mr. Raj in maintaining a well-organized record of his transactions. Tracking crucial details such as cost basis, holding periods, and market values for each transaction became a daunting task.

Optimizing Tax Liability:

  • Mr. Raj aimed to optimize his tax liability by exploring potential tax-saving strategies. However, the lack of clarity on permissible deductions and specific strategies applicable to cryptocurrency trading posed a substantial hurdle in his efforts to strategize effectively.

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How TaxBuddy Helped

Transaction Organization and Categorization:

TaxBuddy played a crucial role in simplifying Mr. Raj's cryptocurrency transactions:

Example Capital Gain Calculation:

Capital Gain from 1st Sale:

Selling Price: INR 3,00,000

  • Minus: Purchase Price: INR 6,00,000

    Capital Loss: INR 3,00,000 (Short-term)

Capital Gain from 2nd Sale:

Selling Price: INR 15,00,000

  • Minus: Purchase Price: INR 7,00,000 (XNOUSD)

    Capital Gain: INR 8,00,000 (Short-term)

Tax Saving Strategies:

TaxBuddy employed strategic tax-saving measures for Mr. Raj:

Tax-Loss Harvesting:

  • The platform identified opportunities for tax-saving, including tax-loss harvesting. This strategy allowed losses from specific transactions to offset gains, effectively reducing Mr. Raj's overall tax liability.

Income Tax Implications:

Tax Rates (FY 2023-24):

  • Short-term capital gains from cryptocurrency trading are subject to taxation at the individual's applicable income tax rates, standing at 30%. Tax is applicable only on INR 8,00,000.

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The Conclusion: 

Mr. Raj

Tax saving Journey

Mr. Raj's tax journey with TaxBuddy concludes on a high note. With TaxBuddy's insights, he seamlessly filed an accurate tax return, incorporating all cryptocurrency transactions. The detailed tax report showcased transparency and aided in a positive review by tax authorities. Mr. Raj's proactive approach and TaxBuddy's assistance exemplify success in navigating cryptocurrency taxation complexities. As a reliable companion, TaxBuddy offers guidance and facilitates compliance for enthusiasts in an ever-changing regulatory environment.

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