Comment on Taxation Simplified

vinayak commented on 25 Jan 2015, 01:46 AM

Dear Neo

You are confusing the grant of the stocks from company to employee’s account and the decision the employee makes after the grant to hold the stocks (or sell immediately).

For example whenever I have gotten RSU grants (multiple companies, same procedure everywhere) this is the way it works – if I’m supposed to get 100 shares (let’s say the market price is $100 each), the company sells 31 shares in the market and credits 69 to my account; the money received from the sale of 31 shares ($3100) is paid directly as TDS (and later shows in my Form 16).

the 69 shares I get – these are my shares; If I then decide to hold them for some time – I am holding capital assets for which I “paid” $6900; let’s say I do hold them for a few months (or longer) and in the meantime the price increases to $300/share; I shall be in that case making a LTCG of 69*($300-$200) = $13800 and would pay taxes accordingly.

In the overall transaction above, my income would be $10000 under the head salary and $13800 under capital gains (STCG or LTCG notwithstanding).

Accordingly set-off against the capital-gains part is possible if someone has capital losses (short term or long term).

“Business Losses” that are not capital losses will still not be eligible for set-off.

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