Taxation on ESOP

I am working in an MNC and am investing into Employee Stock Purchase Program (ESPP). During the purchase of the share there is a 15% discount given on the least value of the 1dt and last date of the ESPP offering period. My finance department has confirmed that the tax is deducted as per my slab ie 30% (shares equivalent to my gain due to 15% employee discount and increase in the value per share from the starting date to the date of vesting) . E.g. out of 100 shares purchased, about 20 shares were sold off to recover for 30% tax on the effective gain.

My question is whether I need to pay any tax on the gain again during ITR filing on the gain. If yes, how much? If no, what all documents I need to keep ready to convince the authority that the no tax is due on this?

Hi Ravi,

In case of ESPP tax liability arrises on 2 occasions:

  1. at the time of opting in for ESPP: It is considered as a Perquisite under Salary Income Head

  2. at the time of selling of shares: It is considered as Capital Gain.

You can read more about it tax implications on ESOPs here :slight_smile:

My company’s investor recently aqquired ESOP from employees. Excercise and sell happened on the same day. Company deducted 30% TDS on the entire gain amount. Form16 also shows the full gain amount as Prerequisite tax under Salary Head.

While filing ITR-2, can I reduce prerequisite tax based on (FMV - excercise price) formula and remain (Sell price - FMV) as capital gain?

Also, I have some carry forwarded short term loss from listed shares. Can I adjust this STCG (of Esop) with the loss? Please help :slight_smile:

Hi @Shubhabrata_Naha

Yes, You can mention Sell price - FMV as capital gain while filing ITR-2.
Moreover, You can also adjust this STCG (of ESOP) with the brought forward short term losses.

If someone has worked in India for 5 yrs and received esops and receives dividends. He also has an EPF.
Now, he has left his job in India and has migrated to Canada permanently. My question is I read that canada taxes the global income of the resident. So, as he worked more than 5 yrs in india and wants to withdraw the EPF, it should be tax free in India. But would it be taxable in Canada? Also, are the dividends received from esops still held taxable in India or Canada. Since dividend is less than 2.5lakh per year, It should be tax free in India. But what about in Canada? Also, how would capital gains be taxed if he sells his esops?

Hey @ranjit, dividend would be taxable in India at slab rate. When ESOPS are sold, it would be taxed under capital gains income considering short term or long term gain. EPF will be taxed on withdrawal, given the withdrawal is done prematurely. You can read more about EPF taxability from here: