Shark Tank judge and Shaadi.com founder Anupam Mittal has questioned the country’s tax rules for Employee Stock Option Plans (ESOPs), saying employees are taxed heavily when they exercise their stock options and become shareholders. In a post on LinkedIn, Anupam Mittal argued that the tax system should encourage employee ownership instead of making it costly, especially as startups look to attract talent and create wealth. For those unaware, ESOPs allow employees to buy shares in a company at a fixed price, often giving them a chance to benefit as the business grows. However, when employees exercise their options, the difference between the purchase price and the market value of the shares is generally taxed as a salary perquisite at their applicable income tax rate.
Then we tax them for becoming one 🤷🏻 Say you get ESOPs at ₹10. You exercise when the share is worth ₹100. That ₹90 appreciation can be taxed as a perquisite at your marginal rate, potentially ~40%.
Anupam Mittal’s comments also come amid a recent Bengaluru Income Tax Appellate Tribunal (ITAT) ruling involving a Flipkart employee. The tribunal held that proceeds from the company’s repurchase of vested but unexercised ESOPs could be taxed as long-term capital gains (LTCG), rather than as salary perquisites. However, the tax treatment depends on the structure and circumstances of the transaction. Sharing his views on X, Mittal wrote: “Why does India punish employee ownership? We keep telling employees – Think like an owner. Why should emp wealth be treated less favourably than long-term wealth created by public or private investors? ESOPs aren’t compensation alone. They are how startups turn employees into owners, align incentives and spread wealth creation beyond founders and investors. If we believe India needs more startups, more employment generation & more wealth creation. …then perhaps we should encourage ESOP ownership, not something we need tax lawyers for. Cheat code – If you can get your co to buy back your ESOPS instead of exercising them, recent case law suggests the gain qualifies for LTCG” You use AI every day. Now get your AI Quotient. Take the AIQ test.