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As we near the 2023 Union Budget announcement, unicorn start-ups spoke to businessline about their expectations from this year’s Budget. A majority of them wanted clarity on Employee Stock Ownership (ESOPs) taxation.
Harsimarbir Singh, Co-founders, Pristyn Care, said the government should offer clarity on ESOP taxation to benefit start-up employees and enable capitalisation of Indian start-up ventures to help them grow. “Start-ups are going to change the nation’s destiny in 25 years. Therefore, the government should focus on introducing a new and simplified tax and regulatory framework along with ease of funds and regulatory relaxations to boost entrepreneurship in the country,” he added.
Dakshinamurthy V Kolluru, CEO of uGDX and TuringMinds (upGrad), believes the government should implement simpler policies and higher tax exemptions via performance-linked incentives to accelerate the growth of the sector.
“The start-up community has remained a key growth driver for India and has positively impacted millions with scalable products for long-term results. Simpler policies and tax exemptions shall contribute towards the Make in India mission while also strengthening the country’s stature as a global superpower,” he added
Nalin Negi, CFO and interim CEO, BharatPe, said in order to nurture the blooming start-up ecosystem, the Indian government should broaden the eligibility criteria around start-up Employee Stock Ownership (ESOPs), so as to provide significant tax reliefs to employees.
What is ESOP
ESOP is an employee incentive that companies give to attract, reward and retain talent. It enables employees to become equity shareholders of the company and benefit from the company’s growth. As per the Income Tax Act, 1961, ESOP tax is applied at two stages: at the time of exercise of options and at the time of sale of shares. Start-ups have been advocating that taxation on ESOPs be applied only at the time of sale of share instead of the existing two-stage taxation, among other things.
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