So i got the ESOPs in my current company and now they want me to exercise it as it is mandatory to exercise the ESOP in a certain period of time. What will happen once I exercise it?? Also i am thinking of quitting the company so what will happen to the exercised ESOP if I leave the company??
Please give any resources to understand the complete what, how and when of the ESOPs and general summary regarding it
Once you exercise an esop, it converts to a share. Even if you quit the company, you remain its shareholder. To exercise an esop, you need to pay the exercise price (which is generally 1 rs per share) . The actual current value of esop then converts to a perk for you and is taxed according to your Income tax slab so your company will ask you to deposit tax amount so they can deposit it as tds. If the current value is low and you think the value will grow in future and you will get good returns, you can do the exercising - the cost for you is income tax that you will have to pay. It’s great if company is doing an immediate buy back or going for ipo soon. One benefit of exercising early in this case is that if price of shares increased significantly you will have to pay lower capital gains tax (20% for short term capital gain and 10% for long term. For private companies holding a share for 2 years make it eligible for Long term and for public listed, duration is 1 year). On the other hand, if the future is bleak, it’s possible that share price at which you are able to finally sell the exercised shares is lower than current value (or zero, if company dies) then your loss is the income tax that you would pay.
Currently after all deductions my income doesn't exceed 5LPA bracket so if I exercise the ESOPs then will there be zero tax?? Also i am in the old tax regime for now.
After adding your esop share price, if it is still less than 5 lakhs, exercise them - it’s no brainer.
Don't exercise unless you are 100% sure you would be getting an exit thought buyback or ipo
I have no idea when the company will do an IPO , in 2022 they did series D round, and they have some rule that i have to exercise the ESOPs in bw of a certain time from the vesting date also please explain why shouldn't i exercise it if i am not sure of buyback or ipo???
You wont get any amount but you have to pay 30% as a tax depend on tax bracket
I watched this video. It has a concise explanation of what RSU is and what ESOPs is. Have a look.
https://youtu.be/CWr6NonhiLM?feature=shared
in simple words - If it is worth, they wont give, if they give in plenty its worth shit.
How do you understand that Esops alloted in ctc are good enough? Do companies have them fixed as percentage of ctc (ex. 30% of ctc) or how does it work?
What are the questions i can ask to get a better understanding of the Esops? One wo...
Hi Guys, what is the “Exercise event” for the ESOPs allotted by Indian startup’s?
Note: Exercise event means when the vested ESOPs can be allotted.
I have come across a couple startup’s which have a very sketchy Exercise event I.e 4 ye...
Hi, I have an ESOPs related question. Appreciate any inputs.
Consider a Series B startup providing an employee with 5000 shares. After 2 years, 2000 shares are vested and exercised by the employee. The stocks were never liquidated beca...
Let's assume that my CTC is 60 LPA, out of which 25 lakhs are ESOPS grant.
This means I get 25 lakhs worth of the company shares, which I can purchase at a lower price set by the company which is called the exercise price.
Some compani...
Truths about ESOP 101
After working in multiple fast growth startup’s and having been part of multiple buybacks as well as being in the startup ecosystem for a decade I want to put to bear my pov about creating wealth through ESOP. ...