ASIA PACIFIC Chapter

ESOPs and RSUs have gained popularity in India, especially in start-up jobs, and international companies with employees in India also offer these employee benefit plans. ESOPs allow employees to own equity shares of the employer company over time, and the taxation of ESOPs occurs at two instances: at the time of exercise and at the time of sale by the employee. The taxation rules differ for listed and unlisted shares, and other factors such as the residential status and disclosures also come into play in determining the tax implications of ESOPs.

The recent alert informed companies about the increase in Tax Collected at Source (TCS) rate to 20% for overseas remittances of participant funds in India, starting from 1 July 2023. However, following concerns from businesses and residents, the Indian Ministry of Finance made last-minute changes, including restoring the annual threshold of INR 700,000 and delaying the implementation of the 20% TCS until 1 October 2023 for individuals exceeding the threshold.