| Question And Answer | |
|---|---|
| Subject: | Queries Regarding Taxability of ESOP |
| Category: | Income-Tax |
| Querist: | CA Govind Agrawal |
| Answered by: | Research Team |
| Tags: | ESOP, ESOP taxability |
| Date: | September 4, 2023 |
Facts in Brief
• An individual will receive certain amount in F.Y.2023-24 on account of sales of shares received under ESOP.
• The shares were received more than 24 months back.
• The company is a unlisted foreign company.
• The amount paid at the time of exercising the option for ESOP more than 24 months back was negligible
• No amount was offered for taxation in the year of exercise for ESOP.
Query
• Taxability of amount which will be received in F.Y.2023-24 on sale of shares under ESOP
• STCG or LTCG
• Calculation of amount of gain
• Exemption available under various section of 54
(other than investment in Residential House Property u/s 54F)
Amount received on sale of ESOPS will be taxed under the head ‘Capital Gains’. If the unlisted shares are held for more than 24 months from the date of allotment of shares, it will be taxed as long-term capital gain (along with benefit of indexation) and if sold within 24 months from the date of allotment of shares, the same shall be taxed as short-term capital gain. The querist will not be able to avail the benefits of sub sections 54 of the Income tax Act, 1961 , however benefit of section 54 F is available subject to other conditions .Refer Kamlesh Bahedia v. ACIT (2015) 151 ITD 495 / 169 TTJ 68 (Delhi)(Trib.) wherein the Tribunal held that; Rights to purchase shares under ESOP is a capital asset and he transferred said right within 36 months of offer, period of holding of right in question being less than 36 months gain arising from transfer of said right was to be assessed as short term capital gain
Pending EXPERT’s opinion:
My random PiCks: Not specified; but going by my honest guess, the querist is an employee of the foreign company’s group company in India. On vesting of the shares in foreign-company no TDS on perq.value was made. As per the scheme under the IT Act, however, for computing CGT, it is the value of the shares as taken for TDS that has to be regarded /deducted as cost of acquisition.
For MoRE input, suggest to my query/comments posted and expert’s opinion, on taxation of RSU.
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^….’suggest to refer my…’!