The short answer
- Shares up to 10% without control are overseas portfolio investment. The plan must be offered globally on a uniform basis to employees of the Indian entity.
- The Indian employer files Form OPI through its bank within 60 days of each half-year end.
- Tax at exercise: fair value minus exercise price, taxed as salary with TDS. Valuation rules sit in Rule 15 of the Income-tax Rules, 2026.
- Remittances to exercise count against the USD 250,000 LRS limit; TCS applies above INR 10 lakh a year. Cashless exercise avoids both.
- Employees must disclose the foreign shares in Schedule FA every year.
FEMA
- Employees of an Indian office, branch or subsidiary may acquire shares under an employee plan offered globally on a uniform basis.
- Up to 10% without control is overseas portfolio investment. Above that, or with control, it becomes ODI.
- The Indian employer reports through its bank in Form OPI within 60 days of each half-year end (by 29 November and 30 May).
Tax
| Event | India treatment |
|---|---|
| Grant and vesting | No tax |
| Exercise | Perquisite: fair value on exercise minus exercise price, taxed as salary. Employer deducts tax |
| Sale | Capital gains. Foreign shares are treated as unlisted; over 24 months is long-term at 12.5% |
| Foreign tax | Credit claimed in India (Form 44 from tax year 2026-27, previously Form 67) |
Money and disclosure
- Exercise remittances use the employee's LRS limit (USD 250,000 a year)
- TCS at 20% on LRS remittances above INR 10 lakh a year, creditable in the return
- Cashless exercise needs no remittance
- Schedule FA disclosure every year, whatever the value
Plan rules and the valuation should be consistent across countries. See why your ESOP needs a valuation.
A worked example
An engineer employed by the Indian subsidiary holds 10,000 options over shares of the Singapore parent, at an exercise price of S$0.50. She exercises when the fair market value under Indian rules is S$2.00.
| Step | Amount | Treatment |
|---|---|---|
| Perquisite at exercise | (S$2.00 minus S$0.50) x 10,000 = S$15,000 | Converted to rupees, added to salary, taxed at her slab rate. The Indian employer deducts tax at source |
| Cash paid to exercise | S$5,000 | Remitted under LRS, unless the exercise is cashless |
| Later sale at S$3.00 a share | Gain of S$1.00 a share over the S$2.00 value already taxed | Capital gain. Over 24 months, long-term at 12.5% |
The tax at exercise is due even though she has received no cash from the shares. That is why many plans allow sell-to-cover or cashless exercise at a liquidity event, and why the timing of exercise matters.
What the Indian employer should do
- Obtain the fair market value on each exercise date in the form Indian rules require, usually from a registered merchant banker for unlisted shares
- Run the perquisite through payroll in the month of exercise and deduct tax
- Agree with the parent whether the cost of the plan is recharged to India. A recharge has transfer pricing and withholding consequences
- File Form OPI on time where the shares are portfolio investment
- Give employees a year-end statement they can use for Schedule FA and foreign tax credit
Things that do not carry across
The Indian deferral of ESOP tax for employees of eligible Indian start-ups applies to shares of those Indian companies. It does not help employees holding options in a Singapore parent. If the group later moves its holding company back to India, the plan itself will need to be replaced: see reverse flip.
Questions people ask
When are Indian employees taxed on options from a Singapore company?
At exercise, on the fair value minus the exercise price, as salary. Gains on sale are capital gains.
What does the Indian employer have to report?
Form OPI through its bank within 60 days of each half-year end, where shares are held as overseas portfolio investment.
Who deducts tax when an Indian employee exercises options in a Singapore parent?
The Indian employer, through payroll, in the month of exercise, on the fair market value minus the exercise price.
Talk it through with an adviser
Tell us your structure and deadlines. We reply with what applies to you and a fixed-fee proposal.
Sources
- Treelife: Foreign parent ESOPs for Indian employees (secondary source)
- RBI: Foreign Exchange Management (Overseas Investment) Rules, 2022
- Corporate Professionals: Valuation under the Income-tax Rules, 2026 (secondary source)
General information only, last reviewed 11 November 2026. It is not advice for your situation. Laws and practice change, and the official sources linked above prevail. Speak to a qualified adviser before you act. Northwise does not file with Indian authorities; India-side work is done by independent licensed firms.
