Tax on ESPP & RSU of foreign companies

POSTED BY jithin t ON March 4, 2013 2:20 pm ONE COMMENT

I know similar questions have been asked before, but I haven’t found a concrete answer yet.

My company is listed on NASDAQ and issues RSUs & ESPP. The ESPP shares are allotted at a discount of 15% of the Fair Market Value (FMV) on the purchase date (PD).

Purchase Price (PP) = 15% of FMV

So my perquisite value is FMV-PP and this is added to my taxable income & tax is deducted during the month when the shares are purchased (irrespective of whether I sell the ESPP shares immediately or hold on to them).

Now assuming that I don’t immediately sell the shares, what would be the tax liability in the following scenarios.

1. I sell them before 1 year from PD but the selling price is MORE than FMV on PD.

2. I sell them before 1 year from PD but the selling price is LESS than FMV on PD.

3. I sell them after 1 year from PD but the selling price is MORE than FMV on PD.

4. I sell them after 1 year from PD but the selling price is LESS than FMV on PD.

In case of (2) and (3) can I claim loss on investment/tax refund (because I paid tax on a higher value, but I sold it for a lesser value)??

Manish could you please write an article on the taxation of ESPP & RSU of a foreign company listed in a foreign stock exchange? It would help many of us.

One reply on this article “Tax on ESPP & RSU of foreign companies”

  1. 2Dear Jithin, the answer is very simple. The holding period is short term for less than 1Y holding & long term for more than 1Y holding.

    Now if there are gains against FMV, it’s either Short Term or Long Term. If there is loss, again it’s either ST or LT.

    The STCG ‘ll be added to you income from all sources & ‘ll be taxed at your slab rate. STCL ‘ll be available for set off against STCG as well as LTCG.

    The LTCG ‘ll be taxed either @ 10.3% without indexation or 20.6% with indexation. LTCL if any can be set off against your LTCG.

    Thanks

    Ashal

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today