As India's 2025 union budget approaches, investors are calling for tax relief on Employee Stock Ownership Plans (ESOPs) to make the startup ecosystem more employee-friendly, emphasizing the need to eliminate double taxation. Currently, ESOPs are taxed both when exercised and when shares are sold, which discourages employees from fully benefiting from these options. Investors argue that taxation should only occur when a gain is realized, aligning India's tax policy with global standards and fostering a more attractive environment for talent retention in emerging sectors like AI and spacetech.

In January 2025, several prominent companies, including Yes Bank, Swiggy, and Zensar Technologies, allocated significant equity shares under their Employee Stock Ownership Plans (ESOPs), highlighting a growing trend of rewarding employees. As the Indian budget approaches, there is heightened anticipation within the startup and venture capital community for tax rationalization to alleviate double taxation on ESOPs, which could make them more attractive. The shift to a more favorable tax environment for ESOPs is seen as a key strategy to incentivize talent retention and boost India's startup ecosystem.

Swiggy's IPO, valued at ₹11,300 crore, has unlocked ₹9,000 crore worth of employee stock options (ESOPs), creating significant wealth for around 5,000 employees, with nearly 500 becoming 'crorepatis.' Employees can sell their shares a month after listing, thanks to a regulatory exemption, while the IPO was oversubscribed 3.59 times, driven by institutional investors. With its ESOP program spanning three plans since 2015, Swiggy's founders and top management collectively hold ESOPs worth ₹2,600 crore, emphasizing the company's commitment to rewarding employee contributions.

 

One97 Communications, the parent company of Paytm, has issued 2.44 lakh equity shares to employees under its ESOP schemes, increasing its paid-up capital to Rs 63.73 crore. Paytm’s shares have surged 185% over the past six months, reaching a 52-week high of Rs 967.10, driven by resolved regulatory challenges and progress on key approvals like a payment aggregator license. Additionally, Paytm introduced UPI Lite for seamless small transactions, and UBS Securities raised its price target for the stock to Rs 1,000, reflecting significant improvements in the company’s outlook.

Mphasis Limited announced the granting of 25,000 stock options under its ESOP 2016 and 12,000 restricted stock units (RSUs) under its RSU Plan 2021 to eligible employees, effective November 7, 2024, as approved by its ESOP Compensation Committee. The stock options have an exercise price of ₹2,900, with equal vesting over five years and a 60-month exercise period, while the RSUs, priced at ₹10, follow a progressive vesting schedule of 10%, 20%, 30%, and 30% over five years, catering to both Indian and US-based employees. These equity grants are administered through the Mphasis Employees Equity Reward Trust, ensuring compliance with SEBI regulations, and the announcement was officially submitted to the BSE and NSE by Senior Vice President and Company Secretary Subramanian Narayan

Capgemini has launched its 11th global employee share ownership plan (Esop), covering 97% of its workforce, including most of its 175,000 employees in India, as part of efforts to align employee interests with company performance. The Esop, offering up to 2.7 million shares (1.56% of outstanding shares), aims to sustain employee ownership at around 8% of the company's share capital, with investment options protecting employees against potential losses during the non-tradable period. Despite a 2.6% revenue decline in H1 2024, Capgemini maintained a 12.4% operating margin and increased organic free cash flow, reinforcing its financial stability as it rolls out this initiative.