Start-up employees must pay attention to risk related to stock option plans

Now, they can take the risk of joining without having to pay taxes on Esops immediately

For quite some time, employees of start-ups have complained about a provision in the income-tax law that caused them hardship. Stock options are taxed in their hands as perquisite at the time of exercising (allotment), creating a liquidity problem for them. In Budget 2020, finance minister Nirmala Sitharaman has announced that the time when start-up employees will have to pay tax on their allotted stocks can be deferred. While their liquidity problems have been taken care of, youngsters joining start-ups need to pay heed to the risks they run when they participate in an employee stock option plan.  

Tax liability deferred: