Investors from India who put money into the failed Terra Classic (LUNC) and TerraClassicUSD (USTC) will now have another headache after receiving airdrops with tokens from the new Terra (LUNA) cryptocurrency, also known as Luna 2.0. Due to the new crypto asset tax law in the country, in force since April 1 of this year, Indians will still have to pay the tax on new assets. According to experts heard by Bloomberg, Indians can be taxed up to 30% of the value of the tokens received and will not be able to offset the values by reducing the losses of previous investments, although the new rules do not explicitly mention airdrops. In the view of several industry experts in the country, however, these distributions can be viewed as income and are subject to tax. And investors are not few either. According to the vice president of the WazirX exchange, Rajagopal Menon, until May 9, the exchange had at least 160,000 holders of the then Terra (LUNA) and, a few days later, the number had already increased by almost 80%. “They [o governo] typically consider the most aggressive view possible with a view to raising higher taxes, even though such a view may result in absurdity,” attorney Jay Sayta told Bloomberg. A specialist in the technology area, Sayta pointed out that the law’s terms are so vague that he would even be open to challenge litigation by the tax department. For Anoush Bhasin, founder of Indian consulting firm Quagmire Consulting, Luna 2.0 airdrops may fit the existing definition of ‘gift’, so a flat 30% tax may not apply, but ‘gifts’ are taxed with based on the taxpayer’s income bracket or on some tax bracket. But that is not all. LUNA holders can be taxed twice, experts explained to Bloomberg. ‘Gift’ or not, there will be two stages of taxation: first, upon receipt of the airdrop, and then if the tokens are sold. “This is the worst case scenario for them as Luna 2.0 was actually issued to offset,” said Meyyappan Nagappan of digital tax law firm Nishith Desai Associates. The new version of the Luna cryptocurrency officially debuted on the 28th under the LUNA ticker — the former LUNA and UST became respectively Terra Classic (LUNC) and TerraClassicUSD (USTC). At press time, LUNA is trading at $4.90 and facing a 3% drop in the last 24 hours, with a 45% loss in the last seven days, according to data on Coinmarketcap.
Cryptocurrency tax in India
India’s tax reform, passed in March this year, mandated a 30% charge on capital gains from bitcoin and other cryptocurrencies from April 1. The proposal to collect the tax came from Finance Minister Nirmala Sitharaman. Opposition members reacted strongly to the bill, drawing attention to the lack of clarity in the text, with several lawmakers claiming that taxes on cryptocurrencies could wipe out the industry. Crypto industry players have even tried to persuade lawmakers to ease the tax rate by attending meetings with the caucuses and publishing several articles on the topic. However, the actions were in vain.
‘Escape’ from the biggest broker
Due to the directives against the crypto sector, WazirX, India’s largest cryptocurrency exchange, may already be being commanded from Dubai, in the United Arab Emirates. That’s because its top directors allegedly left the country because of the Cryptocurrency Act. According to Forbes India magazine, the company’s co-founders Nischal Shetty and Siddharth Menon would have moved with their families to the Arab city.