Terra Classic LUNC/USD investors worldwide lost billions when the project collapsed but when new Terra (LUNA) tokens were distributed as compensation, at least, it was some consolation. However, the Indian investors were not even lucky.
What Happened: According to a Bloomberg report, the tax experts believe that under the new crypto tax rules, the investors may have to pay up to 30% of the value of the tokens as tax, and they would not be able to offset the profits from the new tokens against the losses from the previous tokens.
The country brought in the new laws on April 1 to tax digital assets, where the profits earned from cryptocurrencies such as Bitcoin BTC/USD, Ethereum ETH/USD, and Dogecoin DOGE/USD would be taxed at the highest slab. The rules are interpreted to mean that the losses of one currency can not be offset against the profit earned from others.
Although the rules do not explicitly clarify how airdrops should be taxed — Jay Sayta, a technology and gaming lawyer at Coinbase Inc COIN-backed crypto exchange CoinDCX, told Bloomberg that the distributions can be seen as income and are subject to the tax.
“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,” he 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.”
Rajagopal Menon, vice president at Binance-owned WazirX, said there were over 160,000 investors that held Luna on the exchange on May 9, and the number grew by 77% in India by May 15.
Price Action: According to data from Benzinga Pro, Terra was trading 12.1% higher at $5.31 in the last 24 hours at the time of writing.
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