ESOP scheme-period of holding in case of employee

[Sanjeev Jain]

The Company floated the ESOP scheme on 31/03/2010. As per the ESOP scheme floated by the Company the shares are to be given to certain eligible employees. Employees can exercise shares at the prevailing market price. Shares were allotted to the employee on 31/03/2019. However, the Company credited the shares to the employee's account at the initial date when the scheme was launched based on the assumption that the employee will exercise his right. The employee sold shares on 01/01/2020. Will it be considered long term capital gains or short term capital gains?

[DR.MARIAPPAN GOVINDARAJAN]

In my view it is a long term asset since the entries in the companies are during the year 2010/

AI Summary

ESOP holding period: earlier company crediting of shares can determine long term capital gains treatment upon sale. Whether capital gains are long term depends on when the holding period begins. The company credited ESOP shares to the employee's account at the scheme launch date despite formal allotment occurring later; the adviser treats the earlier crediting entry as the start of the holding period, supporting long term capital gains treatment.