How to Make Gain On ESOP Shares Sale Tax Exempt?

ESOP has come into focus once again on account of its inclusion as benefits chargeable to fringe benefit tax. To know more about it click here.As far as , employees are concerned , newly inserted provision prescribes for tax on capital gain arising at the time of sale or transfers. However, for those employees who are given shares of companies which are listed on India stock exchange need not worry if they be patient a bit. Two

simple steps should be adopted for making the gains non taxable. These are :

1. Do not sell the shares within a yearof being vestedby the company”. This will make those shares as long term capital assets. and
2. Sale only through stock exchange.

This will make the long term capital gains on the sale of the ESOP shares tax freeon account of exemption provision in section 10(38) which is given as under :

“(38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and

(b) such transaction is chargeable to securities transaction tax under that Chapter “

And you live taxworry free ever after!