Earlier this year, Google decided to break everything up and put it all under the Alphabet umbrella. And thus making many Project Manager’s, CEO’s in the process, including Sundar Pichai who is now the CEO of Google. It is a rather brilliant move by Larry Page and Sergey Brin, however with the shares having transferred from Google to Alphabet for many employees, there are some issues. In India, Google’s shares and employee stock options for Alphabet’s stock options are capital gains, which is taxable in India under the law. This is according to Archit Gupta who is the CEO and founder of cleartax.in. Gupta continues by saying that the tax will be payable even though the ESOPs have yet to be sold. After the restructure of Google, the shares held by employees will be deemed transferred which results in capital gains tax.
Gupta states that this is a “buy and sell in the company books” which makes it a tax incidence. When these are held for long-term – meaning more than 3 years – gains are taxed at 20% with indexation. However, for those that have been holding these stocks for less than a year, capital gains will be taxed at “the slab rate” according to Gupta. With the stocks, the tax implications will be the same, however calculations will be a bit different. Gupta also stated that a number of Google employees have reached out to his company, asking about tax implications of the Google entities restructuring, and how it could possibly impact them.
Keep in mind that this is only for India, as this is in accordance with the country’s tax law. It’ll likely be similar for Google employees in other countries as well, due to the reshuffle that has happened this year within Google and now Alphabet. It’s a bit unfortunate for Google employees but at least they know what needs to be done now instead of getting into more trouble with their taxes down the road. Those Google employees that were living in India during the restructure need to report their total global income for the year as well. Again, this is likely the case for employees in other parts of the world as well.