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: Foreign shares held by an individual for more than 24 months are treated as long-term capital assets and otherwise is treated as short-term capital assets. Capital gain from sale of long-term capital assets would be taxed at 20 per cent with the indexation on the purchase price or at 10 per cent flat without such indexation benefit.

Capital gains from sale of short-term capital assets would be added to income and taxed at the slab rates applicable for the individual.

Considering this as an ESOP, taxation is calculated at two stages. At the time of allotment of shares and on sale of shares.

The income is determined based on the difference of the fair market value (FMV) of shares on the date of allotment and the amount paid to acquire such shares. This income is treated as perquisite and taxed as part of salary income at the applicable slab rates.

In the second part, tax is applicable at the time of sale of shares wherein the income would be the difference between the sale proceeds and the cost of acquisition of shares (based on the FMV of the share).

Tax needs to be paid on this and tax payable is based on the tenure as explained above.

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: No such bond currently available and you can adjust your long term capital gains against residential under section 54F. Do consult a CA before executing this.

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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.