ESOP, Demystified.



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For Companies

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₹ 6499/-

For Individuals

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₹ 6499/-

For Start Up India 🇮🇳 Companies

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₹ 10,999/-

For Companies

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Questions? We gotcha.


1. What is an ESOP?

Employee Stock Option Plan or Employee Stock Ownership Plan, abbreviated as ESOP, under the Indian system, enables employees of a company to purchase a certain number of shares of that company. It is an efficient tool that improves remuneration mechanism and employee retention.

2. How ESOP work?

An organization grants ESOP to its employees for buying a specified number of shares of the company at a defined price after the option period. He needs to go through the pre-defined vesting period which implies that the employee has to work for the organization.

3. What is tax Implication of ESOP?

Employee stock ownership plans is considered as perquisites with respect to taxation. The capital gains would be taxed depending on the period of holding. This period is calculated from the date of exercise up to the date of sale.

4. What is ESOP from an employee’s perspective?

With ESOP, an employee gets the benefit of acquiring the shares of the company at the nominal rate, and sell them and make a profit. There are several success stories of an employee raking in the riches together with founders of the companies

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What can be Perquisite tax?
When an employee decided to buy a certain number of shares of his/her company, the difference between Fair Market Value and Exercise Price is taxed as Perquisite. TDS is deducted by the employer on this perquisite value, gets reflected in the employee’s Form 16 and is considered as a part of the total income from salary in the tax return.
What is taxed as Capital Gains?
If and when an employee decides to sell the shares of his/her company, the difference between Sale Price and Fair Market Value on the exercise date is taxed as Capital Gains, as per the tax bracket that he/she belongs to.
What Will be my Advance Taxes on Capital Gains?
Advance Taxes on capital gains demand that an employee pays his/her tax dues for the annual year in advance through instalments. An employee may have to deposit advance tax on earning capital gains, despite the employer being eligible for deducting TDS after the employee exercising his/her options.
What is Exercise Period?
The time period after vesting within which the employee should exercise his right to apply for shares against the option vested in him in pursuance of the ESOS. (7) "exercise price" means the price payable by the employee for exercising the option granted to him in pursuance of ESOS.
What are the benefits of ESOP for the employers?
As the employees would benefit when the company’s share prices soar, it would be an incentive for the employee put in his 100 percent. Although motivation, employee retention and awarding hard work are the key benefits which ESOP brings to the employers, there are several other noteworthy advantages too.
Can be borrowed money at a profitable after-tax price?
Cash borrowed under ESOP can be invested in buying company shares and shares of outgoing owners of the company. Both principal and interest paid for ESOP are tax deductible because they help in repaying the loan amount.
In what ways ESOP helps?
ESOP helps improving overall efficiency and productivity of people in the firm as they are now related to company in 2 ways that is as an employee and also as shareholder and therefore good performance of a company would be in their interest.
How an Employee Stock Ownership Plan (ESOP) Works?
ESOP Provide a Variety of Significant Tax Benefits for Companies and Their Owners. ESOP Rules Are Designed to Assure the Plans Benefit Employees Fairly and Broadly


Still curious?

Call our team for immediate resolution to your questions, or fill out our interest form, and we will get in touch in 24 hours.

Dial +91 9911 464 354.