How taxation is done on ESPP? Can we consider ESPP a better tax saving instrument for reducing the tax liability?

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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

helpful

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

likehelpful

Thank you!!

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