Employees need money to pay the exercise price as well as the perquisite tax on the differential value of the stocks, which arises on the day of exercising the option.
As a part of employee benefit plans, companies provide their workforce an ownership interest in the company through Employee Stock Ownership Plans (ESOPs). Although Employee Stock options are given to the employees at a price which is usually lower than the market value, employees need money to pay the exercise price as well as the perquisite tax on the differential value of the stocks which arises on the day of exercising the option.
The difference in stock prices between fair market value and ESOP value is treated as perquisite and is eligible for TDS deduction by the company and forms part of salary of the employee which is shown in Form 16 and Form 12BA of the employee.
If you have received such an offer and find it lucrative but don’t have enough money to exercise the option, you may consider the ESOP funding offered by ICICI Securities to finance both the exercise price as well as the perquisite tax at a simple interest for up to 13 months.
You may avail the funding provided that you are holding an Entitlement Letter from your employer and you are a resident Individual customer having a 3-in-1 account with ICICI Bank. You don’t have to worry if you don’t have a 3-in-1 account, because ICICIdirect extends the offer to it prospective clients with the facility to open a demat account within 1 hour, depending on eligibility, as well as faster loan processing.
Following are the key features of the ESOP funding offered by ICICI Securities.
- There will be no lengthy documentation since you are an ICICIdirect customer
- You will get funds up-to 70 per cent of the market value of the stock (depends upon stock to stock and other terms and conditions)
- There will be no monthly EMI obligation and you may pay the principal and the interest amount at your own discretion
- You may settle the loan anytime without any pre-payment charges through the flexible repayment facility
- Interest will be charged at simple interest rates as given in the following table