Definition
ESPP
An Employee Stock Purchase Plan lets employees buy company shares, often at a discount, usually through payroll deductions; the discount is taxed as a perquisite in India.
An ESPP allows employees to purchase company stock, frequently at a discount to market price, by setting aside salary through payroll over an offering period. It is a way to build equity ownership gradually.
In India, the discount (difference between market price and what you pay) is generally treated as a perquisite and taxed as salary when you acquire the shares. On later sale, gains above that value are capital gains, short- or long-term by holding period and listing status.
ESPPs can be attractive due to the discount, but concentrating wealth in your employer's stock carries risk; many participants sell periodically to diversify, mindful of the tax at purchase and sale.
Related terms
- ESOP TaxationEmployee Stock Options are taxed in India at two stages: as a perquisite on exercise based on the share value, and as capital gains when the shares are eventually sold.
- RSU Vesting & TaxRestricted Stock Units are company shares granted to employees that vest over time; in India the value at vesting is taxed as a perquisite, and later sale gains as capital gains.
- Perquisites (Perks)Perquisites are non-cash benefits or amenities provided by an employer — like company car, accommodation or interest-free loans — that are valued and taxed as part of salary.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.