When the algorithmic-stablecoin project failed, Terra investors worldwide lost billions of dollars. But a new token was distributed as compensation, “Luna 2.0”. As a result, they could recoup a small portion of their losses. Unfortunately, India’s investors aren’t as fortunate due to new tax laws that came into force in April.

People who received the new coin known as Luna 2.0 in an “airdrop” and live in India suffer a double whammy because the country’s tax regime penalizes crypto investments, potentially resulting in 30% tax bills.

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Tax experts say that people who receive tokens could be taxed up to 30% of the value of the tokens. LUNA 2.0 holders won’t be able to offset any profits from the new token against losses from the old token. In addition, all income from transferring a virtual digital asset will be taxed at a rate of 30%.

Strict Taxation On LUNA 2.0 Airdrop

The country’s tax laws require people to pay taxes on any money they earn from crypto investments, whether they want to or not. As a result, many Indian investors will have to pay a lot of money in taxes.

According to Jay Sayta, a technology and gaming lawyer, the text of this law is unclear when it comes to airdrops, but there are “vague” passages that could lead taxmen right down your throat. In fact, these very vagaries may work in favor of tax authorities.

Jay Sayta said;

They 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.

As per Anoush Bhasin, founder of crypto-asset tax consultant Quagmire Consulting, the Luna 2.0 airdrops may fall within the existing definition of gifts. Therefore a flat 30% tax may not apply, but presents are taxed based on a taxpayer’s income range or slab rate.

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The Vice President of the Binance-based WazirX crypto exchange, Rajagopal Menon, also remarked that over 160,000 investors held Luna on the exchange on May 9. By May 15, the number had grown by 77% in India. However, how many more investors had TerraUSD in their portfolios is unknown.

There are two stages of taxation when it comes to airdrops. The first is when you receive the tokens. You will have to pay a gift tax or a flat 30% tax based on the valuation of the tokens at the time they are given to you. The second stage is when you sell the tokens. You will have to pay a flat 30% tax on any income you earn from the sale of the tokens, no matter how they are categorized.