One thing is not clear. How much capital gain tax need to be paid when you sell the share in market (if you sell within 1 yr of vesting). Will it be 10% of difference between selling price and Vesting Rate or it will be difference between selling price and exercise price.
RE:Tax on Capital Gain
by amit jain on Oct 31, 2007 07:27 PM Permalink
Capital gain tax is liable on difference between cost price and selling price. So, cost price will be FMV on the vesting date. eg You got the ESOP shares at 100, on vesting date FMV was 500. You sold at 700 2 months later. So, capital gain would be 700-500 into number of shares. FBT would be 30% of 500 -100. After deduction of FBT, 500 becomes your cost price. Else, it will be double taxation.
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Chances of loss or gain on stock holding as per ESOP Scheme not very important ,it is the factorswhich will decise the increase or decrease of stock as per companies performance stock market position.
