Big LTCG gains for startups staff holding Esop in secondary deals

The reduction in long-term capital gains (LTCG) tax on unlisted securities to 12.5% from 20% could benefit startup staffers holding employee stock option plans (Esop), if their shares are bought by an investor during a secondary funding round, founders and tax experts said.

While such deals are often conveniently termed as Esop buybacks — even though the shares are not repurchased by the company that issued them — these are typically secondary deals where an investor is buying the shares providing liquidity to employees.