In order to give a boost to the start-up ecosystem, the Budget proposes to ease the burden of taxation on the employees by deferring the tax payment by five years or till they leave the company or when they sell their shares, whichever is earliest.
Start-ups deserved special attention and the proposal to defer tax payment has indeed came as a positive signal to entrepreneurs to stay invested in the country.
As per the Finance Bill, it applies to employees of the companies which qualify as eligible start-ups under Section 80-IAC, and to be eligible under Section 80-IAC, start-ups have to get a certificate from an inter-ministerial board.
Employee Stock Option Plan (ESOP) is a significant component of compensation and during formative years, start-ups generally take this route to attract and retain talent.
