Esops won’t be taxed for five years

New Delhi: Finance minister Nirmala Sitharaman on Saturday proposed easing of tax payments for startups with a view to promote growth of budding entrepreneurs.

“In order to give a boost to startup ecosystem, I propose to ease the burden of taxation on the employees by deferring the tax payment by five years or till they leave the company or when they sell, whichever is earliest," she said while presenting the Union Budget for 2020-21. ESOP (employee stock option plan) is a significant component of compensation for these employees, she said.

Currently, ESOPs are taxable. “This leads to cash flow problem for the employees who do not sell their shares immediately and continue to hold the same for long term,” she said.

Reacting to this proposal, Harshil Mathur, CEO, Razorpay, said, “This deferment of tax payment by five years, to me, is one of the biggest welcome moves by the government in this budget. This is a good start.”