Startups: MPs’panel for making ESOPs non-taxable till sold

New Delhi, August 10

A parliamentary panel has recommended to the government to amend the Income Tax Act to ensure that ESOPs (Employee Stock Option Plan) are taxed only at the time of sale of shares and not on notional gains to allow startups to hire ‘low-cost’ employees.

In its 182nd report, the Department related Parliamentary Standing Committee on Commerce, chaired by Congress Rajya Sabha member Abhishek Manu Singhvi, said, “It is recommended that necessary amendments to the Income Tax Act may be considered so that ESOPs are taxed only at the time of sale of shares and not on notional gains. The Committee in the report observed that ESOPs play “a significant role in the startup community”, as they use “this instrument to attract employees on low salaries and to conserve cash for investing in the business”.