Big LTCG gains for startups staff holding Esop in secondary deals
LTCG) tax on unlisted securities to 12.5% from 20% could benefit startup staffers holding employee stock option plans (Esop), if their shares are bought by an investor during a secondary funding round, founders and tax experts said.
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While such deals are often conveniently termed as Esop buybacks — even though the shares are not repurchased by the company that issued them — these are typically secondary deals where an investor is buying the shares providing liquidity to employees.
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If the buyback is by the issuer, the pay-out is treated as bonus and the employees may face higher tax depending on their total taxable income.
Over the recent months, several late-stage companies that are stitching together secondary funding rounds are using such events to provide liquidity to employees holding stock
