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Tax Expert - Answered on May 05, 2023

Mahesh Padmanabhan has specialised in payroll, personal and corporate taxation for more than two and a half decades, enabling him to provide practical, realistic and correct advice to his clients.
He is a member of The Institute of Chartered Accountants of India and has a degree in cost accounting from the Institute of Cost Accountants of India.
He is also a qualified information systems auditor. ... more
Vijay Question by Vijay on Apr 30, 2023Hindi
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What are the tax implications on the foreign company ESOP sell profits?

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.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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I have ESOP from a US-listed company for which I was working till 2018. 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 are the tax implications for me in India? I am now an Indian living in India. What steps must I follow for transferring the proceeds into my Indian account?
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.

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