Clarification on Taxability of Reimbursement of Securities/Shares as SOP/ESPP/RSU to Employees

Last updated: 27 June 2024

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This notification clarifies the taxability of employee share schemes like ESOP, ESPP, and RSU when provided by an Indian company through its overseas holding company. It addresses situations where employees of an Indian subsidiary are allotted shares of a foreign holding company, and the subsidiary reimburses the cost. The clarification aims to provide guidance to trade and field formations on this matter.

F. No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

North Delhi, New Delhi
Dated the 26th June 2024

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on the taxability of ESOP/ESPP/RSU provided by a company to its employees through its overseas holding company - reg.

Representations have been received from the trade and field formations seekingclarification regarding the taxability of Employee Stock Option (ESOP)/Employee Stock Purchase Plan (ESPP)/ Restricted Stock Unit (RSU) provided by a company to its employees.

2.1 It has been represented that some of the Indian companies provide the option to their employees for allotment of securities/shares of their foreign holding company as part of the compensation package as per terms of contract of employment. In such cases, on exercising the option by the employees of Indian subsidiary company, the securities/shares of foreign holding company are allotted directly by the holding company to the concerned employees of Indian subsidiary company, and the cost of such securities/shares is generally reimbursed by the subsidiary company to the holding company.

For full notification please refer to the attachment

FAQ :

This notification provides a clarification on the taxability of Employee Stock Option (ESOP), Employee Stock Purchase Plan (ESPP), and Restricted Stock Unit (RSU) provided by a company to its employees.

The clarification is addressed to Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/Commissioners of Central Tax and Principal Directors General/Directors General.

It addresses scenarios where Indian companies offer their employees shares of a foreign holding company as part of their compensation, and the Indian subsidiary company reimburses the cost of these shares to the holding company.

The clarification was issued in response to representations received from the trade and field formations seeking guidance on the taxability of these employee share schemes.

For the full notification, please refer to the attachment provided with the original document.