ESOP Taxation for Startups post Budget 2020: Action and Inputs

Many of you have been writing to LocalCircles for clarification on the ESOP announcement by the Finance Minister on Saturday, Feb 1. We are pleased to share with you that the ESOP recommendation submitted by LocalCircles to the Finance Minister was accepted and ESOPs for startups will now become taxable on Exercise Date instead of Sale Date.

However, in the Finance Bill we have found that the benefit has only been made available to IMB certified startups (approximately less than 250 in India) and the criteria also includes the earliest of sale, 5 year period post Exercise Date or employee exit from the company. This will not result in much benefit for neither the startup ecosystem nor the employee.

We are taking up this issue with the Finance Ministry as well as Ministry of Commerce so the additional conditions are removed and the benefit is made available to all DPIIT registered startups, atleast the ones exempt from angel tax. Additional declarations may be sought by the Government. We will keep you posted.

If you have additional inputs on this subject, you are welcome to share the same. more  

View all 8 comments Below 8 comments
It is a heartening news - should help in keeping the Startups flowing high and mighty more  
Good if it really helps the startup projects n give boost to their growth, in true spirit, provided there are no veiled conditions or stings attached to it. Best luck to the new startup projects n ventures
Jai Hind more  
Read something on this today please clarify more  
I think the section itself does not cover start ups and venture capital. There should not be any confusion on thsi account. Income Tax Officers in India never raise right questions in his entire life time. A recent judgement ahs even kept sec 56 (2) out of application where shares were issued at premium/ discount to comply with Banks conditions. more  
We have also received notice from our Assessing officer adding back the difference between the Equity Share Price as per Share Valuation Report and the price at which the CCPS were subscribed by a Resident Investor. CCPS price was higher than the Equity share price. CCPS will anyways be higher as it comes with Board rights and investor protection rights more  
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