Find
ESOPs are taxed at two separate events, a fact most employees (and many employers) don't know until the tax notice arrives:
Startup ecosystem · ESOP
How ESOPs are taxed: the two-event model every employee must understand
Updated . Every paid answer is checked by a CA. Free AI answers are labelled until a CA verifies them.
Provisions
IT Act 1961, Sec 17(2)(vi) (now 17(1)(d)) | Sec 192 (now 392) | Sec 45 | Finance Act 2020 Sec 192(1C)
Analysis
Event 1, Exercise: When employee exercises options and receives shares, the difference between FMV on exercise date and exercise price is taxed as perquisite income (salary), at the employee's marginal rate (up to 30%). Event 2, Sale: When employee sells the shares, the difference between sale price and FMV on exercise date is taxed as capital gains, LTCG at 12.5% (if held 24+ months for unlisted), STCG at slab rate.
Close
Talk to a Savvy for the exact next step on your case.
Connect now
A Savvy replies in minutes.
Fixed price before you pay. Your Savvy is paid only after you accept the work.
General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.