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Assume if share price is at 115$ & your company offers you a 15% discount to you. It would be 100$. The difference between fair market value & your excised price is 15$. It is taxed as per your income tax slab rate.
When you sell buy price is considered as 115$.
So if you sell at 120$
You have to pay the usual ltcg or stcg tax for those 5$ alone
Hope this helps you
1. Yes you save taxes when you sell if your tax rate on salaried income is above 15% ( why 15% is because it’s the rate for stcg tax )
2. Varies from company to company but yes there are both sort of companies
3. Yes only the gains are taxed that too you discounted gains won’t be taxed.
Like I mentioned early
Current price 115$
Discount given 15%
Tax under slab rate is 15$ on the year when esop is issued
Sell price is 120$ next year
Gains made 20$
Gains tax eligible is 15% of 5$ only
Govt won’t question your capital because in espp you convert your salary into esop so the capital is already taxed every year as per your slab rate
Thank you!!