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Terra’s algorithmic stablecoin, USTC collapse has left a massive dent in the global cryptocurrency market. Its investors lost billions of dollars in the recent crash. However, in order to cut the loss of the holders, Do Kwon launched an airdrop of the fresh tokens. Meanwhile, Indian investors might be facing a 30% tax over their Terra holdings.
Will LUNA airdrop will be taxed?
After bearing a heavy loss over Terra Classic (LUNC) and TerraClassicUSD, the Indian crypto community can be charged under the new tax regime. According to Bloomberg, the amount of Terra LUNA 2.0 tokens received under the airdrop can be taxed by 30% by the Indian government. However, the holders won’t be able to cancel any gains in the new token against the loss born from the old token.
In the recent budget, the Indian Finance Minister declared that a tax of 20% will be levied over the crypto gains from April 1, 2022. This also included Tax deduction at source (TDS) on every transaction. However, it is not clear that will airdrops come under it. Manhar Garegrat, CoS at CoinDCX, points out that such distribution can be considered as income. Hence, it can be subject to the tax.
How tax can be calculated?
As per the report, Jay Sayta, a tech lawyer, highlighted that the words used in the law are unclear. There is not much clarity on the definition of virtual digital assets and transfer. The tax department examines every way possible to collect taxes.
Rajagopal Menon, Vice president of WazirX, shared some data regarding the Terra LUNA holders in India. As per the data, over 160,000 users held the token on May 9. However, it saw a jump of 77% by May 15. Meanwhile, it is still unclear how many of the holders had TerraUSD. May 11 and 12 recorded the highest volumes in LUNA.
As per the report, experts state that the new tax regime can hold two stages of taxation. A gift tax or flat 30% tax will be charged on the valuation of tokens received in the airdrop. In the second stage, a flat 30% tax will be levied if the tokens are sold at a higher value.
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