Tax filings more challenging on surge in F&O, gaming app play
July 29, 2024
Synopsis
The massive jump in retail participation in futures and options trading, crypto trading and sports betting has increased the tax filing challenges for chartered accountants and lawyers. People who are helping consumers file their taxes told ET that many of them have undertaken 25,000 FnO transactions, more than 1 lakh crypto trades and actively bet on sports.
A massive jump in speculation in the futures and options (F&O) market and betting through gaming apps is throwing up a problem of a different kind.
Chartered accountants and lawyers who help individuals file their income tax returns are facing difficulty tabulating the volume of transactions that in many cases ranges from 25,000 to as high as over 100,000 entries.
Add to that the complexity of tabulating taxes for transactions in cryptocurrencies, the challenges grow manifold.
A senior chartered accountant from Kolkata said a lot of his clients undertook these trades without understanding the tax implications of the gains and losses.
“Now tabulating all those for tax purposes is becoming a challenge for me,” he said.
Roshan Agarwal, who runs his own firm Agarwal Roshan and Associates in Dibrugarh, Assam, told ET that his clients have multiple demat accounts making the problem for tracking losses even more complicated.
“Opening demat account with these apps is a breeze these days for those clients who are okay with it, I take their login passwords into each of their brokerage accounts and generate their statements, that way I can save time,” Agarwal said.
“For those clients who do not want to share their personal ID, I have to teach them how to generate the right statements which is time consuming,” he added.
Increased complications
The first CA cited in the story pointed out that tracking all these transactions is almost impossible on an excel sheet anymore.
“For customers who do F&O or are engaged in excessive speculation, I charge them extra given the effort we need to put to tabulate their taxes,” he said.
Interestingly, Agarwal said he is seeing most of his salaried clients engaging in excessive speculation.
“Also this year I am seeing that most of my clients are in losses in the stock markets,” Agarwal added.
Technology and tax filing
Trading has become a more mass-market activity these days given the rise of discount brokers, tech platforms that have made onboarding a breeze. Industry insiders said the popularity of platforms like Pokerbaazi, Dream11 and Ludo has brought in many first-time taxpayers into the ecosystem.
Bengaluru-based Clear has built a sophisticated platform to make tax filings easier. The Y-Combinator-backed startup has integrated with all the major stockbrokers, gaming applications and crypto platforms to fetch the profit and loss statement of their user directly.
“We have automated and scaled the systems to handle large data sets. We have had customers who had 120,000 crypto transactions and 28,000 F&O transactions and our systems could process it within two seconds,” said Avinash Polepally, senior director, Clear.
Having a technology-based solution helps given there are many complications in tax filings for gaming and F&O trading, Polepally said.
“For futures, losses can be carried forward and tax would not be paid but for gaming losses cannot be carried forward; we are automating many such processes,” he said.
Zerodha chief executive Nithin Kamath said the second largest stockbroker in the country has partnered with Quicko to simplify tax filings.
He took to ‘X’ to explain that all the documents needed for F&O traders were available on the ‘Console’ section of the website and encouraged people to file their taxes early.
[The Economic Times]
