A recent ITAT ruling has clarified the tax treatment of ESOPs that are repurchased before exercise. The tribunal held that vested stock options constitute a capital asset, meaning proceeds from their repurchase should be taxed as capital gains rather than a salary perquisite. It also said employer TDS filings cannot determine the nature of the transaction. The ruling reinforces that the substance of an ESOP transaction matters and highlights the importance of carefully structuring vesting, exercise, repurchase and related tax obligations.
Please click here to read the full article by Raj Ramachandran, Partner, published in The Economic Times.
Raj specializes in Corporate Commercial, Banking & Finance and Cross Border Investments & Acquisitions.