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Find out how Remote can guide you through the complexities of managing cross-border hiring, payroll, taxes, and compliance.

Stock options for employees in India

Equity incentives are an invaluable way to attract, motivate, and retain top talent for your business. But when you cross hiring borders, they can become deeply complex.

Remote enables you to easily offer non-qualified stock options (NSOs) to your team members in India. There are no compliance headaches or administrative hassles — just simplicity and clarity for you and your people at every step.

What are NSOs?

NSOs are a type of equity incentive. They give your team members the right to buy a set number of shares in your company at a fixed price, known as the exercise price.

This typically happens after a vesting period, which is often based on the length of time your team member stays at your company. As a result, they are a great way to foster long-term commitment, and align people with your company’s strategic goals.

Who can receive NSOs in India?

Direct employees EOR employees Contractors
Can receive NSOs? Yes Yes Yes
Difficulty score Hard Hard Hard

It’s important to note that granting stock options to contractors can potentially increase your misclassification risk in India (although this is not the primary factor). See how Remote protects you against misclassification.

How are NSOs taxed in India?

In India, NSOs are taxed in the following ways:

Direct employees EOR employees Contractors
At grant There is no taxation at grant. There is no taxation at grant. There is no taxation at grant.
At exercise The spread is taxed as salary income. The spread is the difference between the fair market value of the shares at the time of exercise, and the exercise price (or “strike” price) paid by your team member. The spread is taxed as salary income. The spread is the difference between the fair market value of the shares at the time of exercise, and the exercise price (or “strike” price) paid by your team member. The spread is taxed as salary income. The spread is the difference between the fair market value of the shares at the time of exercise, and the exercise price (or “strike” price) paid by your team member.
At sale The gain is taxed as either short-term or long-term capital gain. The gain is taxed as either short-term or long-term capital gain. The gain is taxed as either short-term or long-term capital gain.

Note that, for contractors, taxation can differ depending on the contractor's status.

It’s also important to be aware of the following:

  • 409A valuations are not accepted to determine the fair market value of the shares (and, thus, the taxable basis at exercise). They must be valued by an Indian Category 1 Merchant Banker.
  • The repatriation of sale proceeds are required (this is the employee’s personal obligation).

Are there tax advantages for your team members?

Direct employees EOR employees Contractors
If the shares are held for more than 2 years, your team member is eligible to pay long-term capital gain tax (which is lower than the usual rate). Note that tax deferral to the time of sale is only possible for companies qualifying as an Indian startup. If the shares are held for more than 2 years, your team member is eligible to pay long-term capital gain tax (which is lower than the usual rate). If the shares are held for more than 2 years, your team member is eligible to pay long-term capital gain tax (which is lower than the usual rate).

Is your business eligible?

If you want to use Remote Equity Advanced to offer stock options to your India-based team members, your top corporation (i.e., your parent company) must be incorporated in Delaware. Your company must also be private — not publicly listed.