Defer your tax liability from ESOPs by extending exercise period

For more favourable tax treatment at sale, hold the acquired shares for more than a year

Media reports suggest that not just startups but even listed companies belonging to traditional sectors are increasingly using employee stock ownership plans (ESOPs) to reward and retain talent.

Aditya Chopra, managing partner, Victoriam Legalis, said: “ESOPs are typically awarded to employees in senior roles and serve as a lucrative incentive for them.”

Startups continue to use them extensively. Pallav Pradyumn Narang, partner, CNK, said: “Startups are nowadays distributing ESOPs across the board to retain employees.”

Opportunity for wealth creation  

If the company performs well, its share price increases. Nihal Bhardwaj, associate, SKV Law Offices, said: “Employees can exercise their stock