5 things to know about Employee Stock Purchase Plan

1) ESPP is one of the ways to attract and retain employees by making them shareholders and giving them ownership to 1the company.

2) ESPP gives the employee the choice of purchasing stocks of his company listed on the stock exchange from his salary, at a discounted price.

3) Once enrolled in ESPP, the employee will contribute a fixed part of his salary for a fixed period of time to purchase stocks of his company.


4) The discount on the stock price is a part of the salary and comes under perquisite and hence is taxed as per tax slab on the purchase date.

5) At the time of sale the profit is taxed under Capital Gains as long term or short term depending on the holding period.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.