Taxability of ESOP under Income Tax Act, 1961

• September 18, 2020
• CA Chandan Agarwal's Office

1. WHAT IS ESOP?

ESOP means Employees Stock Option Plan. It enables employees to buy company share at discounted price. Start-ups have great business idea but a limited financial resource to operate in the initial years. It is popular these days as starts-ups generally use ESOP to attract and retain highly talented employees for long term in low salary which gives them sense of ownership in company.

2. TAXABILITY OF ESOP UNDER INCOME-TAX ACT

The taxation of ESOPs is split into two components:

a) Tax on perquisite as income from salary at the time of exercise of option.

b) Tax on income from capital gain at the time of sale.

Read more on: https://taxguru.in/income-tax/taxability-esop-income-tax-act-1961.html