ESPP Taxation For US Listed Company

Taxation
1

My company offers ESPP which provides shares @15% discount. I am trying to understand is it worth it post tax basis. I am not planning to hold the shares to avoid concentration risk.

What are the tax implications. Does anyone have any experience with the same.

  1. How is STCG calculated and how much to be paid.
  2. How is the exchange rate provided to convert it back to INR or possible to keep in USD and invest in US Companies directly-> So we wont loose on the FX Costs.
  3. How to file Income Taxes in India

@Quicko , Please help or redirect to any blogs that cover these topics?

2

Can you flip that on the market or do you have some sort of a lock-in?

3

No Lock-in. I can sell day after being alloted. But trying to understand what is the real post tax profit I will get. And also what is the taxation rules applicable

4

I see. I have a friend who also works in a US company and buys shares at a discount. Let me ask him too.

5

Thanks @Suyash.K . I am looking at

  1. How is STCG calculated and how much to be paid.
  2. How is the exchange rate provided to convert it back to INR or possible to keep in USD and invest in US Companies directly-> So we wont loose on the FX Costs.
  3. How to file Income Taxes in India
6

Hello @ranton137,

With regards to tax implications for the ESPP:

The shares you get at a discount will be treated as perquisite under the head salary i.e taxed at slab rates. In your case, 15% (discount) of the share value will be added to perquisite, as that is the value that a company extends to you.

Now when you sell these stocks:

  1. STCG (held for less than 24 months) is taxed at slab rates. The cost of acquisition will be the amount you paid + the discount amount already taxed as perquisite.
  2. As per Rule 115A of the Income Tax act, the foreign exchange rate is to be taken as the average of the telegraphic transfer buying rate (TTBR) and the telegraphic transfer selling rate (TTSR) of the last day of the month prior to the date of the transaction.
  3. If you re-invest the same amount in the US markets, the amount of capital gains will be taxed in India as Foreign Income

You can prepare and file your ITR on Quicko. Here’s a link for your reference: Prepare your Income Tax Return : Help Center

To know more about it you can refer to this article: ESOPs Taxation in the hands of an Employee - Learn by Quicko

Hope this helps!

7

@Quicko can you confirm the above bit as well?
i.e. is it legal for one to re-invest proceeds from sale of foreign stocks in a foreign stock exchange,
without repatriation (USD to INR) back to India within specific deadline (eg. 30/90days)?

8

Hello @ranton137,

If you’re trading in open market then you would have a broker account in that country as well. Hence you can re-invest the gains in the US market and pay tax in India on such gains.

Hope this helps!