Investors in India have been dealing with a rash of tax issues since the crash of TerraUSDT and Luna, and the launch Luna 2.0. Although Terraform Labs has created a recovery plan and launched Luna 2.0 in order to make up for the losses, there are still concerns.
Gift Tax on Luna 2.0 Airdrop
Bloomberg recently analyzed the tax issues Luna 2.0 brings with it.
Luna 2.0 was provided as an airdrop and is therefore treated as a gift. This will allow it to be subject to applicable tax provisions. According to the analysis, this means that investors will need to declare the Luna 2.0’s value and pay the gift tax at the time they file tax details.
“They [tax authorities] usually consider the most aggressive view with a goal to collect higher taxes, even though such a view might result in absurdity,” Jay Sayta, a technology- and gaming lawyer, said in the Bloomberg report.
Capital Gains Tax on Profits
This is not the end of the problem. Gains from crypto transactions will be subject to a flat 30% tax starting April 1, 2022. Investors will be required to pay 30% capital gains tax on the sale of Luna 2.0. Losses on crypto transactions cannot be offset against profits. Therefore, Luna 2.0 profit will not be repaid.
Sayta says that the law’s wordings are too vague, such as the definitions of virtual digital assets and transfer, so it could be subject to litigation or challenge by the tax department.
The airdrop comes with additional tax obligations after you have lost all your investments in Luna or UST.
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