ESOPs trigger tax at exercise as salary perquisite and again at sale as capital gains, affecting cash flow and planning.
ESOP taxation occurs at exercise and at sale. At exercise the FMV less exercise price is a perquisite taxed as salary with employer TDS; at sale capital gains apply using the FMV at exercise as cost of acquisition. Treatment varies by listed/unlisted status and holding period, and eligible startup employees may defer perquisite tax under statutory relief. (AI Summary)