Taxation of employee stock option plans
Live MintEmployee stock option plans have gained popularity among start-ups. Here’s an example: Say, on 1 April 2021, Minali joined Company XYZ and had the option to purchase 500 shares at an exercise price of ₹510 per share. Manav joined the company on 1 April 2021 and had the option to purchase 5,000 shares at an exercise price of ₹1 per share. The difference between the exercise price and the fair market value, that is, ₹99 per share x 1,000 shares aggregating to ₹99,000 will be treated as a perquisite in the hands of Manav. The tax on this perquisite will be payable within 14 days from the occurrence of any of the following events: a) Expiry of 48 months from the end of the relevant assessment year ; or b) From the date of sale of such ESOP shares by the assessee; or c) From the date of the taxpayer ceasing to be the employee of the ESOP allotting employer The rates of tax in such cases shall be the one applicable for the year in which ESOP was allotted.
History of this topic
Swiggy IPO makes 500 employees 'crorepatis'; unlocks ₹9,000 cr worth of ESOPs
The Hindu
From staff to millionaires: Swiggy IPO to make 500 employees crorepatis
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Employee stock option plan: How to save taxes on ESOPs— explained
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Tatas likely to announce ESOP scheme for Air India employees by April 27 | Details
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