A bunch of startups are tweaking their compensation packages to include more employee stock options, after the budget proposed a deferment of tax on the stock component for such companies incorporated after April 1, 2016.
According to the proposal in finance minister Nirmala Sitharaman’s February 1 budget, employees at young startups would get the option to defer payment of tax on ESOPs — instead of paying tax at the time of stock allotment, they can pay it when they exit the company, at the time of selling the shares or five years after allotment, whichever is earlier.
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The Man Company, Deal Share, CallHippo, FlexiSpaces and AdvisoryMandi are among the startups that are looking at this option.
“The budget proposal to defer the timing of payment of taxes on ESOPs provided by eligible startups would make such ESOPs more attractive to employees and eligible startups can now look at ESOPs as a key compensation component in their initial years when they face a liquidity crunch,” said Shalini Jain, partner, People Advisory Services, EY.
Source: Economic Times
