Benefits derived from exercising ESOPs at reduced price taxed as perquisites

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SummaryUnder Employee Stock Option Plans (ESOPs), employees receive the right to purchase a certain number

money gained from ESOPs, employees forget the potential tax liability arising out of the capital gains and end up facing the unforeseen tax burden at a later stage.

To sum it up, to optimise returns from ESOPs one must hold the shares for more than one year to avoid long-term capital gains tax, sell on a recognised stock exchange in India and if the shares are sold in less than one year, the employee has to pay short-term capital gains tax.

The writer is managing partner, Nangia & Co. Inputs from Neha Malhotra

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