Tax on ESOPs
I had gotten a few shares of a company I used to work for. Unfortunately the time period to exercise the contract is just 90 days after I leave so that means either I have to lose all the shares since I didn't complete the whole vesting schedule or buy it from them!
I wanted to understand how the tax works in a case like this! The company is still not traded so I can't sell the shares but have to buy it and hold it until IPO!
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if you exercise ESOPs they become shares under your name. you have to pay taxes on
(no. of ESOPs you want to exercise)*(FMV - strike price).
FMV is usually share value as per the recent most valuation.
paid ESOPs taxes this year. exact same situation like yours. shoot more questions if you feel like.
What if FMV is lower than strike price?
If I'm not wrong STCG is taxed the same as Income Tax.