01 Oct 2026
Gains From Unexercised ESOP Buybacks Taxable As Capital Gains: ITAT
06 Sep 2026
06 Sep 2026
This is a link enhanced version of the article that first appeared in Inc42.
Article Overview:
The article examines an Income Tax Appellate Tribunal (ITAT) ruling that gains arising from the repurchase of vested but unexercised employee stock options (ESOPs) are taxable as long-term capital gains rather than salary perquisites. It looks at the implications of the ruling for employees and companies, including the tax treatment of ESOP buybacks and the differing judicial interpretations around payouts for unexercised ESOPs.
Our Partner, Meyyappan Nagappan, shared his perspective. Here’s what he had to say:
“While companies typically report ESOP repurchases as employee related expenses for tax purposes, the ruling implies that it should instead be treated as an acquisition of a capital asset.”
“There might be a mismatch in how the company treats its expenses versus how the employee is taxed. The categorisation treatment has an implication on the various disclosures.”
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