Question on US based ESOPs in India
Hi, Say a Series B (US) funded startup gives me 3000 shares which are worth $5/share. It follows the usual vesting period of 4 years. Now assume 4 years have passed and all the 3000 shares are vested but the company hasn't gone IPO. Here are my quesions - When exercising US stocks in India, what is the % of withholding tax I should pay? - Say if I exercised all the shares and if I decide to leave the company do I get to keep those exercised shares with me forever? I prefer answers from people who have exercised ESOPs before. I don't want answers like "It depends, Talk to your HR or CA". Appreciate any inputs.
The only correct answer here (to your disappointment) would be to talk to a CA who's an expert in international ESOPs taxation.
Even if someone does give you an answer here, there's no guarantee that it is correct! (They could've gotten it wrong as well?)
And the amount of time you're gonna spend for getting answers and ensuring genuineness is better spent talking to a CA.
Ask how many days you have after leaving the org to exercise ESOP, and if it is before actual ESOP expiry, ask if taxes will be recovered by a) liquidating a portion of ESOP or b) from your cash salary. You pay taxes on ESOP exercise on your actual tax bracket (consider its net value as actual cash given as salary to buy the stocks for tax treatment). Depending on company growth and chances of stocks liquidity a or b can be Beneficial/harmful in terms of money. Example if you paid taxes from actual cash salary and either equity never liquidity never happened or happened on prices lesser than the additional tax you paid, you will be in loss. Avoid startups with such ESOP traps
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