India 🇮🇳

Country guides for offering equity compensation to remote employees

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India 🇮🇳
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Introduction

Direct employees

Can receive NSO?

✅ Yes!

General taxation

Spread taxed as salary income.

Sale gain taxed as either short term or long term capital gain.

General tax, reporting & legal paperwork difficulty score

🤯 🤯 🤯

Tax advantages

When the shares are held for more than 2 years, there’s a long term capital gain taxation (which is lower than the usual rate).

Tax deferral to time of sale only possible for companies qualifying as Indian start-ups.

Warning point

409A valuations are not accepted to determine the fair market value of the shares (and taxable basis at exercise). Valuation by an Indian Category 1 Merchant Banker is mandatory.

Repatriation of sale proceeds required (employee’s personal obligation).

Alternatives to traditional stock options (such as phantom stock, VSOP or cash-settled stock appreciation rights) can be recommended.

EoR employees

Can receive NSO?

✅ Yes!

General taxation

Taxation differs depending on contractor’s status. As a rule, spread likely taxed as business income and gain made upon sale as capital gain.

General tax, reporting & legal paperwork difficulty score

🤯 🤯

Tax advantages

When the shares are held for more than 2 years, there’s a long term capital gain taxation (which is lower than the usual rate).

Warning point

Granting stock options as a foreign company to people in India without having a local presence through a branch or subsidiary comes with a few uncertainties and legal obstacles, regarding a.o. the possibility to hold shares in a foreign entity and sell these shares within a certain period after exercise.

409A valuations are likely not accepted to determine the fair market value of the shares (and taxable basis at exercise). Valuation by an Indian Category 1 Merchant Banker is likely required.

Repatriation of sale proceeds required (contractor’s personal obligation).

Alternatives to traditional stock options (such as phantom stock, VSOP or cash-settled stock appreciation rights) can be recommended.

Contractors

Can receive NSO?

✅ Yes!

General taxation

Spread taxed as salary income.

Sale gain taxed as either short term or long term capital gain.

General tax, reporting & legal paperwork difficulty score

🤯 🤯 🤯 🤯

Tax advantages

When the shares are held for more than 2 years, there’s a long term capital gain taxation (which is lower than the usual rate).

Warning point

Granting stock options as a foreign company to people in India without having a local presence through a branch or subsidiary comes with a few uncertainties and legal obstacles, regarding a.o. the possibility to hold shares in a foreign entity and sell these shares within a certain period after exercise.

409A valuations are not accepted to determine the fair market value of the shares (and taxable basis at exercise). Valuation by an Indian Category 1 Merchant Banker is mandatory.  

Repatriation of sale proceeds required (employee’s personal obligation).

Alternatives to traditional stock options (such as phantom stock, VSOP or cash-settled stock appreciation rights) can be recommended.

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the

India 🇮🇳

?

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India 🇮🇳

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