I've seen your answers to tax queries raised by readers of rediff.com and find your answers quite useful. I too have a question in this regard, which I've asked below.

I was an NRI working abroad at a startup in the UK during which time I vested stock options as part of my compensation. I returned to India about 2 years ago and now my tax status is an Indian resident.

The startup has gone public in the UK stock market now, and I would like to know if I have to file/pay advance tax when I either exercise & sell and/or only exercise these stock options, OR, can I just file my return as usual in the next financial year before the 31-Jul deadline as usual?

Ans: Residents of India are required to pay tax in India on global income. It is advised to seek clarification from your UK employer whether they will deduct Income Tax from your salary in the UK before remitting to an Indian Bank account.

If yes, then you can claim credit of UK taxes deducted, subject to fulfillment of certain conditions, from Indian Tax Liability.

Ans: If you are a senior citizen as on March 31 and have no business income, then there is no advance tax payment required to be paid by you.

You can file your return and pay tax on the filing date.

Practically, you can pay the tax just before you file your return and include the details of the tax paid in your return.

 

Ans: I understand you are resident and ordinary resident for the Income Tax purpose. Accordingly, when you sell shares (US equity market), it will be taxable as Capital Gain (assuming trading in shares is not main source of income).

If shares are sold after holding it for more than 24 months it will be taxable at 20% (plus applicable surcharge and cess).

Ans: Hello Devendran,

Firstly, let's discuss your tax implications for selling the Pre-IPO shares after holding them for two years. In India, shares that you've held for more than one year are considered long-term capital assets. The gains from selling such assets are called long-term capital gains (LTCG). The tax on LTCG from equity shares is 10% if the gains exceed ₹1 lakh in a financial year.

However, there's an important catch here. The LTCG tax of 10% applies only if the Securities Transaction Tax (STT) was paid both at the time of purchase and sale of these shares. Since you bought Pre-IPO shares, it's likely that STT was not paid at the time of purchase as STT is typically only applicable for transactions occurring on a recognized stock exchange. In such cases, your gains may be taxed at 20% with indexation benefits (if applicable).

Moving on to the second part of your question about gifting shares to your son. Under current Indian tax laws, any gift received from a relative, including a parent, is not taxed in the hands of the recipient. So, if you gift these shares to your son, he won't have to pay any tax at the time of receiving the gift.

However, when your son eventually sells these shares, he'll have to pay tax on the capital gains. The cost of the shares for the purpose of calculating capital gains will be the cost at which you originally purchased them.

Please do consult with a chartered accountant or a tax consultant to understand all the details specific to your situation.

Hope this helps!

Ans: This depends upon your stock options agreement with your company.