coinquora.com
Early in May 2022, crypto investors lost billions of dollars following the collapse of LUNA 1.0 and Terra USD (UST), Terraform Labs’ (TFL) respective native coin and algorithmic-stablecoin. They recovered a small part of their losses when TFL distributed a new token, LUNA 2.0, as compensation. Indians, nonetheless, are less fortunate in this regard.
Because the Indian tax system is punitive to crypto transactions, holders of LUNA 1.0 and UST who benefited from the airdrop of LUNA 2.0 could pay as much as 30% of the value of tokens they recovered in tax.
According to the newly enforced law, crypto investors are to pay a 30% tax on profits made from cryptocurrencies, including NFT sales and mining rewards.
Although the law didn’t mention how airdrops may be taxed, Jay Sayta, a technology and gaming lawyer, said airdrop distributions can be seen as income and are subject to the tax.
Sayta said:
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.
Anoush Bhasin, the founder of crypto-asset tax advisory firm Quagmire Consulting, said that the Luna 2.0 airdrops may fit into the existing definition of gifts so a flat 30% tax may not apply.
Under the new tax regime, there are two stages of taxation. First, a flat 30% tax will be levied based on the valuation of tokens at the time of credit. Second, if the tokens are sold, a flat 30% tax applies to the incremental income regardless of how the tokens are categorized.
At the time of writing, Terra LUNA Classic (LUNC) and LUNA 2.0 trade at $0.00008555 and $5.39, respectively, according to CoinMarketCap.