Indian Terra Investors Face 30% Tax on LUNA 2.0 Airdrop
Indians who received the LUNA 2.0 token via airdrop may have to pay as much as 30% tax on the token due to the crypto tax policy in the country.
The crypto tax regime became effective in April.
Tech lawyer Jay Sayta and CoinDCX, the executive director of policy Manhar Garegrat told Bloomberg that the distribution could be considered income taxable.
Meanwhile, crypto tax advisory firm Quagmire Consulting’s founder, Anoush Bhasin, believes the airdrop could qualify as a gift rather than income, which would reduce the tax hit on holders.
Indian investors in Terra are being taxed 30% on the LUNA 2.0 airdrop, even though they have made losses.
Due to the crypto tax policy in India, those who received the LUNA 2.0 token via airdrop may have to give up as much as 30% of it and there is no tax shield to compensate for losses.
The new crypto tax regime went into effect in April. It has a 30% flat-rate tax on the transfer of virtual assets. Even though airdrops are not mentioned specifically, experts believe they will be included.
Jay Sayta, a tech lawyer, and Manhar Garegrat, the executive director of policy at CoinDCX, told Bloomberg that the distribution could be considered income taxable.
The law is full of vague wording, which could result in the tax department being challenged or taken to court.
He continued by saying that the tax department usually chooses the option that will make the most money. Therefore, they might see the airdrops as income and charge taxes on them.
It's not clear how many Indian investors lost money when Terra's price crashed. However, Rajagopal Menon (WazirX vice president) says that on May 9th, more than 160,000 investors held LUNA in Indian exchanges.
The number of LUNA tokens bought on May 15 rose 77%. This is because investors were hoping that the price would recover. However, the exchange does not have information on how many people were holding TerraUSD at the time.
The founder of Quagmire Consulting, Anoush Bhasin, believes that the airdrop could be classified as a gift, rather than income. If this is the case, it would reduce the tax burden on holders.
If I receive a gift, it will still be taxable, but at the flat rate for my income range of 12% instead of 30%. In India, gifts are taxed based on the taxpayer's income range.