How income made on shares listed on Nasdaq underneath ESOP are taxed?

Question: I’m an Indian resident employed with an Indian subsidiary of a US-based guardian firm listed in NASDAQ. The guardian firm has supplied us with shares via ESOP schemes. Will the income made on the sale of those shares be taxable in India? If sure, what are the holding interval necessities for short-term and long-term capital beneficial properties and the tax charges for short-term and long-term beneficial properties on this case? Can we take the good thing about price inflation indexation right here?

Answer: Any revenue arising on the sale of shares allotted to you underneath the ESOP or any comparable scheme is taxed underneath the pinnacle “Capital Gains” in India. Since the shares allotted to you might be listed on Nasdaq and never in Indian inventory exchanges they’d be offered on that inventory change and wouldn’t be subjected to Securities Transaction Tax (STT) and due to this fact provisions of Section 111A and 112A is not going to apply. The income made on such shares shall be taxed as long-term capital beneficial properties if these shares are held for greater than 24 months. You are entitled to say indexation for computing the long-term capital beneficial properties. 

Long-term capital beneficial properties are taxed at a flat 20% after indexation. If the shares are offered inside 24 months, the income shall be taxed as short-term capital beneficial properties. The short-term capital beneficial properties are handled like your common earnings and get taxed at a slab price relevant to you

The holding interval shall begin from the date of allotment of the shares and never from the date of allotment of the ESOPs. I presume your employer had deducted/collected tax on the distinction between the honest market worth of the shares and the train value on the date of allotment. So whenever you promote these shares, the honest market worth of such shares on the date of allotment shall be handled as your price. Any extra realised over such price shall be handled as capital beneficial properties.

Balwant Jain is a tax and funding professional and will be reached at jainbalwant@gmail.com and @jainbalwant on his X deal with.

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Updated: 20 Sep 2023, 08:38 AM IST