5 days ago
Why Tax Deducted on ESOPs May Still Trigger Notices
Mudit’s employer took tax from his pay when his foreign stock options became shares.
He thought that meant all his tax work was finished.
However, India also requires people to report foreign shares they own.
This reporting is separate from paying income tax.
Mudit had not sold any shares, but he still needed to list them in Schedule FA.
The tax authorities received information from abroad and noticed the missing details.
ClearTax helped him file a revised return with the correct information.
The case was closed after the updated details were uploaded.
Mudit, a Gurugram software professional, received an Income Tax Department notice despite tax being deducted when his foreign ESOPs vested.
The notice followed the department receiving overseas financial data showing foreign shares missing from his tax return.
Employer-withheld tax covers income tax on vested shares but does not replace foreign-asset reporting.
Foreign shares and unexercised options must be reported in Schedule FA, even if no shares were sold.
ClearTax filed a revised return under Section 139(5), adding Schedule FA details through an offline ITR-2 JSON upload.
- Who
- Mudit, his employer, the Income Tax Department, and ClearTax, with CA Samadhan handling the correction.
- What
- A taxpayer received a notice because foreign ESOP-related shares were not reported in Schedule FA, despite tax being deducted at vesting.
- Where
- Mudit is based in Gurugram, India; the missing information concerned foreign shares.
- When
- The issue arose after Mudit filed his return for FY 2024–25.
- Why
- Tax deducted on vested shares covered income tax but did not satisfy the separate requirement to declare foreign assets.
Key facts
- Tax year
- FY 2024–25
- Missing disclosure
- Foreign shares were omitted from Schedule FA.
- Shares sold
- Mudit had not sold any shares.
- Tax treatment
- The employer deducted tax when the foreign stock options vested.
- Correction method
- A revised return was filed under Section 139(5).
- Return form
- The correction used ITR-2 and an offline JSON file.
- Outcome
- The Income Tax Department updated Mudit’s profile and closed the case.
Sources
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