ESOP of foreign entity from Indian Employer

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This discussion clarifies the tax treatment of Employee Stock Options (ESOPs) granted by a foreign entity to an Indian employer. It explains how the difference between the grant price and the market value at exercise is treated as a perquisite for income tax purposes, reported in Form 16. The cost of acquiring the shares is then used to calculate capital gains tax upon selling the shares.

Kinjal B Shah

Kinjal B Shah (Querist)

09 October 2021 Hi, I have encased ESOP as per below details
Qty - 50
Grant Date - 18.12.2018
Grant Price per unit - $44.61
Exercise & Sale Date - 07.05.2020
Sale Price/FMV $ on 07.05.2020 - $57.08
Sales Proceeds - $2853.9
Cost of option - $2230.50
Taxable compensation - $623.40
Federal Tax & Charges - $255.70
Net Proceeds - $367.70
Can you guide me, How it would be charged to tax under perquisite in form 16 and also capital gain tax?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 October 2021 $44.61•50 on 18/12/18 perks.
Capital gains $623.40 07/05/20
Claim tax relief for $255.70 federal tax paid.

Kinjal B Shah

Kinjal B Shah (Querist)

10 October 2021 Hello Sir, thank you for your reply. But I have actually exercised & sold shares in FY 20-21. Also my employer has shown it in form 16 as perquisit in FY 20-21 approx. Rs.42000. Kindly advise. Thank you 🙂

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

10 October 2021 Consider perquisite as per form 16 in FY 20-21. Consider it as cost for capital gains.

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