Luna 2.0 brings new taxation challenges for crypto investors in India

In addition, the crash and the launch of Luna 2.0 has resulted in a ton of taxation issues for crypto investors in India. 
In addition, the crash and the launch of Luna 2.0 has resulted in a ton of taxation issues for crypto investors in India. 

The devastating UST/LUNA model has already been a source of suffering for crypto investors. In addition, the crash and the launch of Luna 2.0 has resulted in a ton of taxation issues for crypto investors in India. 

While the company behind TerraUSD (UST) has issued its recovery plan to compensate for the losses faced by the investors, concerns around the taxation are piling up.

Luna 2.0: A gift or a headache?

As per a report by Bloomberg, the Luna 2.0 would come under the gift category as it is provided free of cost in an airdrop by Terraform Labs. As a result of this, the new token will attract applicable tax provisions in the nation. According to the report, the investors would be needed to disclose the value of the airdropped Luna 2.0 and pay up the gift tax during the time of filing tax details. A technology and gaming lawyer Jay Satya commented on the matter by stating:

“They [tax authorities] 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.”

The problem chases investors even more, when India has imposed a flat 30% tax from April 2022. This leads to investors’ obligations to pay a 30% capital gains tax when they sell their Luna 2.0. 

According to the new law, the losses on crypto transactions are not allowed to be offset against the gains. This means that the losses on Luna will not be compensated with the gains from Luna 2.0.

Like many, Satya calls the wordings in the law vague. He stated:

“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.”

The government of India has received a serious backlash from the Indian crypto community over the heavy tax imposed. However, the government seemed unaffected and is reportedly planning to impose another 28% on crypto profits.