This discussion addresses the taxation of Employee Stock Ownership Plans (ESOPs) offered by non-listed foreign companies. When these companies buy back stocks and pay employees in cash, it's subject to capital gains tax. The tax treatment depends on how long the shares are held: gains from sales within a year are short-term, while those held longer are long-term. The entire sale value is generally considered for capital gains calculation.
18 November 2024
Dear Sirs, My son is offered ESOP every year which is a non-listed foreign company. They buyback stocks at regular intervals and pay cash to their employees, which is not a part of the CTC. Kindly advise how the capital gain is calculated and it's taxed. Thanks for your kind answer. Prasanna
18 November 2024
If sold within one year, they are considered as short-term gains. Currently, long-term gains on listed equity shares are taxed at 10% without indexation on LTCG above Rs 1 lakh, whereas short-term capital gains are taxed at 15%. Consider entire sale value as capital gains.