Luna 2.0 Airdrop Exposes Investors in India to Tax Burdens (Report)
The crash of Luna and TerraUSDT and the launch of Luna 2.0 have unleashed a wave of taxation issues for investors in India. While the Terraform Labs team has worked out a recovery plan and launched Luna 2.0 to compensate for the losses, concerns are piling up.
Gift Tax on Luna 2.0 Airdrop
In a recent analysis, Bloomberg throws a spotlight on the taxation issues that Luna 2.0 airdrop brings along.
Since Luna 2.0 has been provided free of cost as an airdrop, it’ll be treated as a gift and will attract applicable tax provisions. It means, at the time of filing tax details, investors will have to disclose the value of the airdropped Luna 2.0 and pay up the gift tax, the analysis noted.
“They [tax authorities] normally consider the most aggressive view possible with a view to collecting higher taxes, notwithstanding the fact that such a view may result in absurdity,” the Bloomberg report quotes Jay Sayta, a technology and gaming lawyer, as saying.
Capital Gains Tax on Profits
The problem doesn’t stop here. Any gains on crypto transactions are to be taxed at a flat 30% with effect from April 1, 2022. The investors will have to pay a 30% capital gains tax when they sell their Luna 2.0. As losses on crypto transactions are not allowed to be offset against profits, losses on Luna will not be compensated with the profit from Luna 2.0.
“The wordings in the law are so vague, including the definition of virtual digital asset and the definition of transfer, that it would be open to litigation of challenge by the tax department,” Sayta adds.
After losing all the investments in Luna and UST, the airdrop brings additional tax obligations to keep in mind.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.