K Srinivas, CMA CS
Quick Summary
Employee stock options (ESOP) are part of an Employee benefits program offered by Startups to engage the employees in a more effective manner. The ESOPs issued to the employees provide them the benefit or right to purchase the shares of the Employer company, at a predetermined price, in a future dat
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FAQ :
ESOPs are a benefit offered by companies, allowing employees the right to purchase company shares at a predetermined price on a future date.
Previously, tax on ESOPs arose in two instances: when the options were exercised (taxed as perquisite) and when the shares were sold at a profit (taxed as capital gains).
The previous rules meant employees had to pay tax on the 'perquisite' value when exercising options, even if they hadn't yet sold the shares and realised any monetary gain.
Budget 2020 allows employees of recognised startups to defer the payment of tax on exercised ESOPs for up to 48 months from the end of the assessment year, or from the date of sale or cessation of employment.
No, these amendments are specifically applicable only to startups recognised under Section 80-IAC and are effective from Assessment Year 2021-2022 onwards.
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