i’ve been allotted stocks beneath the worker stock option plan (ESOP) with the aid of my corporation. The business enterprise has deducted tax at supply (TDS) inside the economic year (FY) 2015-sixteen.i’ve now not bought those shares, but plan on promoting them later. What will be the tax implications on my maintaining these shares before I sell them and submit-sale?

—Jayesh Bhandari

We remember that you have exercised inventory options granted and vested to you below the ESOP of your business enterprise, and for this reason the stocks of the employer had been allotted to you by theemployer in the course of FY16.

There are ranges of taxation in recognize of stocks allocated to personnel beneath ESOP.

the primary point is while the stocks are allocated through the organization enterprise. The equal is taxed as profits or perquisite within the hands of the worker. the second one is when the employee sells the shares allotted to her beneath ESOP. At this level, the gains are taxed as capital profits.

At the first stage, the distinction between the honest market cost (FMV) of the shares on the date ofexercising and the exercising rate paid by means of the worker, if any, is taxable as perquisite or incomeat the date of allotment of stocks. consequently, the agency business enterprise might have computed and deducted the tax on perquisite or profits attributable to allotment of stocks to you beneath the ESOP. The income and the perquisite tax deducted with the aid of the business enterprise thereon might bemeditated in shape sixteen, which is to be issued to you for FY16 by 31 may 2016.

similarly, you need to document the same as part of profits for your personal tax return.

whenever you promote these shares, the profits from the sale will be taxed as capital gains.

The capital profits are computed as distinction between the sale proceeds and FMV of the stocks thatchanged into taken into consideration by means of the organisation enterprise at the same time ascomputing the perquisite value along with any expenditure that has been incurred wholly in connection with the sale.

The tax implications at the capital advantage could rely on numerous different factors inclusive of thelength of protecting of shares with the aid of you from the allotment date, whether your corporationcompany is listed, and others.

Do keep in mind that due to the fact capital gains tax isn’t deducted at source for the shares under the ESOP programme, you will be required to pay tax in this both as enhance tax or as self-assessment tax.


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