I was offered ESOP by a USA listed company for whom i was working before. It seems a trading account has been created in my name in US where the dividend proceeds from the ESOP stocks have been deposited along with the stock. Now what is my tax implications in india being an indian living in india. What pricedures do i fillow for transferringthe proceeds into my indian bank account and what remittance code ir reason should i use.

Ans: Hi Vijay

I am assuming that you are referring to sale of foreign shares held under ESOP grant held by an employee.

In case you have held the ESOP share for more than 24 months then it would be treated as Long Term asset. You could index the cost and any gain resulting from the calculation would be taxed at 20%

If the period of holding is shorter then the gain (if any) would be taxed at your slab rate.

Ans: Any profit arising on the sale of shares allotted to you under the ESOP or any similar scheme is taxed under the head “Capital Gains" in India. The profits made on such shares shall be taxed as long-term capital gains if these shares are held for more than 24 months. You are entitled to claim indexation for computing the long-term capital gains. Long-term capital gains are taxed at a flat 20% after indexation. If the shares are sold within 24 months, the profits shall be taxed as short-term capital gains. The short-term capital gains are treated like your regular income and get taxed at a slab rate applicable to you. The holding period shall start from the date of allotment of the shares and not from the date of allotment of the ESOPs. I presume your employer had deducted/collected tax on the difference between the fair market value of the shares and the exercise price on the date of allotment. So when you sell these shares, the fair market value of such shares on the date of allotment shall be treated as your cost. Any excess realised over such cost shall be treated as capital gains.

Ans: Let's address your queries one by one:
1. After payment of Estate Duty in the USA, when the brokerage is allowed to release the shares, where will the shares of C have to be kept?
o Once the Estate Duty is paid, the brokerage can release the shares. Since C is a minor, his 50% share should be kept in a custodial account until he reaches the age of majority. The shares cannot be sold and the money parked in a bank account in India without following proper legal procedures and tax regulations.
2. When a part of the shares are sold by the brokerage for payment of Estate Duty, will the sale price attract capital gains tax?
o Yes, the sale price will attract capital gains tax. The capital gains tax will be calculated based on the difference between the sale price and the fair market value of the shares at the date of death.
3. What will be the cost of acquisition for B & C? Will it be the price at which the shares were originally acquired or the price on the date of death of the holder (this is the rate which has been considered for calculation of the Estate Duty)?
o The cost of acquisition for B and C will be the fair market value of the shares on the date of death of the holder. This value is used for calculating the Estate Duty.
I hope this helps clarify things. If you have any more questions or need further assistance, feel free to ask.

Ans: You can avail benefit Sec 54F by investing consideration of shares into new house property as per other prescribed conditions (including the condition that you dont have more than 1 house property on the transfer of shares)