ITAT rules unexercised ESOP buyback payouts taxable as capital gains

When you work at a company, you might be given 'stock options.'

These are like golden tickets that let you buy a piece of the company later.

A worker named Pramod Kumar Jain got these tickets from his employer, Flipkart.

The company bought some of his tickets back and paid him Rs 2.33 crore before he ever used them.

The tax office, called the Income Tax Department, said this money was like a salary and should be taxed the way wages are.

But a special tax court called the Income Tax Appellate Tribunal said it was more like selling something you own.

When you sell something you own, the profit is called a 'capital gain.'

The court pointed out that Jain never used his tickets and never got any shares, so he was only selling his right to buy shares later.

The court also said that just because a company writes 'salary' on a form, that does not decide how the tax law treats the money.

So the court decided the money should be taxed as capital gains, not as salary.