'ESOP taxation challenges should be addressed'

'ESOP taxation challenges should be addressed'

Credit: iStock image

By Anil Joshi

There is a need for tax parity between listed and unlisted startup capital gains tax, especially for unlisted entity since investors are always looking for a long term investment into startups, there are always uncertainties. An equal treatment with listed entities at par will be a game-changer for the industry.

In addition, ESOP taxation challenges should also be addressed taking into account ESOP exercises where liquidity is not guaranteed but tax liability comes instantly. This is a very uncertain scenario especially when it's an unlisted entity. The employees are liable to pay tax, considering the fact that at the time of liquidation it can be zero. When employees exercise liquidity that time it should be taxable and a fair chance to employees should be given.

(The writer is the founder & Managing Partner, Unicorn India Ventures)