Saturday, June 10, 2023

Terra Traders in India Suffered Significant Loss


Terra shareholders all over the globe lost a significant amount when the algorithmic-stablecoin program fails. However, they were able to regain a portion of their losses when a new token was given as a settlement. Indian investors are not as lucky.

Since the country’s tax structure penalizes crypto investments, TerraUSD and Luna token owners who receive the new currency, Luna 2.0, through an airdrop suffer a double blow. According to tax professionals, they might charge them a tax of up to 30% of the worth of the tokens they acquire. Thus, they will be unable to credit any profits in the new token for deficits in the prior one.

The current crypto taxation system, which goes into effect on April 1, will tax any revenue resulting from the transfer of a virtual digital asset at a fixed rate of 30%. It does not state specifically how they will give tax on airdrops. Nevertheless, Jay Sayta claims that the transfers can be an earning and are subject to taxation.

As per Rajagopal Menon, vice president at Binance WazirX, there were around 160,000 investors who acquire Luna on the market on May 9. Hence, on May 15, the number went up by 77% in India.

According to Anoush Bhasin, the Luna 2.0 airdrops may fall within the common framework of presents. Bhas is the creator of the crypto asset tax consultancy company, Quagmire Consulting. As a result, while a flat 30% tax may not exist, donations are calculated depending on a taxpayer’s income bracket, or slab level.

Worst-Case Scenario

Experts at Bloomberg interact with a note that under the new tax framework, whether they consider it a gift or revenue from crypto, there will be two steps of taxes. First, they will apply a gift tax or a flat 30% tax at the moment of credit, depending on the worth of tokens at the time of credit. Second, if the coins are sold, a flat 30% tax will be levied on the extra income they obtain. This is regardless of how they classify the tokens, even if the tokens’ price increases.

Luna 2.0 begins operating on May 28. Thus, it was trading for $6.59 as of June 3 at 2 p.m., US East Coast duration, down 9% in the previous 24 hours, as per CoinGecko and Huobi Global.

The predicament reflects an Indian administration that has long been wary of cryptocurrency. The tax system announces this year treats digital assets adversely in comparison to equities and bonds. As a result, it prompts fears of a crypto exodus. Trading hampers as a government payment system is inaccessible to cryptocurrency exchanges. Unfortunately, it prevents customers from funding their accounts with rupees.

Why Do Token Airdrops Exist?

An airdrop is a method of transferring a token straight to wallets. They may use this for a variety of reasons. Airdrops are a popular way for early-stage crypto ventures to attract consumers by providing free tokens. Moreover, they can also use it to reward early users.

In the instance of Terra, Terraform Labs uses an airdrop to reward investors. Moreover, they also resurrect the project when the stablecoin crashes. Dropping the value of sister cryptocurrency Luna to near zero and wiping away billions of dollars of wealth. Terraform Labs determines which user wallets should get Luna 2.0, currently known as Terra Classic.

Rajat stated that worldwide projects would continue to provide airdrops. However, it will be more challenging to do so in India since crypto traders there may lose millions.

Louis Honsa
Louis Honsa
Louis Honsa is an independent writer for Cryptoconstellation. He is a data analyst and trades NFT’s too. Louis enjoys cycling and working out in his free time.

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