I was an NRI working abroad at a startup in the UK during which time I vested stock options (type Non-Qualified Stock Options / NSO) 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.
From what I’ve read up on taxation in India I understand that on exercise I will have to pay IncomeTax at slab rates on the FMV less Exercise price of these. Could you please confirm if my understanding on this is correct?
And also in this regard, 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 do I just file my return as usual in the next financial year before the 31-Jul deadline as usual? (because as far as I can tell this does not involve any capital gains unless I’m mistaken)
The Taxation on ESOP/RSUs will be part of perquisite in salary at the time of exercising it. Kindly refer this article, it shall answer your queries. Advance tax is payable on capital gains, to understand if this will qualify as capital gains or not read ‘Tax implication of ESOP’ from the article.
Thanks for the response @Hem_Shah Am taking a look at the article now.
Just to clarify, these ESOP’s would be treated as “unlisted shares” correct (since they are listed in the UK stock market)?
Listed Shares must be listed on a recognized stock exchange in India. Thus, if you sell shares of a listed foreign company, they would be treated as unlisted shares if they are not listed on a recognized stock exchange in India.
Hi,
I am looking to exercise some stock options (of type Non-qualified Stock Options/NSO) that I had vested while working in the UK. I am now a tax resident in India and hence as per this article I understand that on exercise the perquisite will be taxed under the head of ‘salary’.
I’m trying to determine how the amount in rupees (INR) on exercise of these stock options will be calculated. Given that this would be considered “unlisted”, what would be the value in British pounds (GBP) and the GBP to INR exchange rate that should be used for filing taxes?
When you sell any foreign stocks, as per Rule 115, the conversion rate from foreign currency to INR has to be taken of the last day prior to the month in which such transaction was executed. And whatever amount has been taxed as perquisite will be taken as acquisition cost to determine the taxable capital gains.
One related question on the exercise of stock options, does the amount taxed as perquisite have to be paid as “advance tax” as OR can it just be filed in next financial year before the 31-Jul deadline?
If you’re not associated with the company anymore then TDS will not be deducted for the perquisite component, so to avoid interest u/s. 234C advance tax should be paid.
can LTCL from listed shares be adjusted against LTCG from unlisted shares even if there is LTCG from listed shares. i.e., not setting of loss 1st against LTCG from listed shares and making offset against LTCG from unlisted shares…
As per the IT Act rules, LTCL can be set off only against LTCG. The chronology is not defined for listed or unlisted shares. So, even the LTCL from unlisted shares can be set off LTCG from listed shares.
But ideally, the LTCL from listed shares will be set off against LTCG from listed shares. If any amount remains, then LTCL from unlisted shares will set off against LTCG from listed shares.
The unabsorbed loss can be carried forward for 8 years consecutive years. The carried forward loss can be set off with capital gains income of the relevant years.
Am taking a look at the article now.