TDS Liability in case of ESOP



Quick Summary
Employee Stock Options (ESOPs) are a key part of startup compensation, allowing companies to attract talent. ESOPs are taxed in two stages: as a perquisite when exercised and as capital gains upon sale. To alleviate the immediate tax burden on employees, especially for eligible startups, new provisions allow for deferred tax deduction. This means employers can deduct tax on ESOPs at a later date, typically within 14 days of specific events like the employee selling the shares or leaving the company.

ESOPs have been a significant component of the compensation for the employees of start-ups, as it allows the founders and start-ups to employ highly talented employees at a relatively low salary amount with the balance being made up via ESOPs. Currently, ESOPs are taxed as perquisites under secti
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