Can anyone help me with the concept of stock options. As per my offer letter I will be granted INR 2 lakh stock options.
So is it free or will I have to pay anything upon exercise of the options?
Look for exercise price and fair market value. You obviously have to pay exercise price while exercising.
Go throught the offer letter, if you cant find it then ask the people in company
In the FAQ's it's written 1 rupees is the exercise price
For fmv you have to ask company itself.
Example
If exercise price: 1 rupees
Fair market value : 10 rupees
during exercise you get 10 rupees share if you pay 1 rupees thus your profit is 9 rupees. You also have to pay perquisite tax on 9 rupees profit(Look it up for more info)
Above scenario depends on whether company allows you to exercise or not. Unless company is going public you won't be able to exercise the stocks. But sometimes company does buy back which allows you to exit.
Ask your HR : when can you exercise your options? Has the company ever done a buyback? Is there a planned one in future?
You can sell the stocks back to company and get the money or you can reclaim those stocks by paying some small amount and get them in your demat account..once you sell them there'll be taxes applicable
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