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Indian-American CEO says India’s tax rules hurt employees
Singh noted that his employees could end up having to pay lakhs out of their own pockets for shares they can't sell, or be forced to give up the equity.
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Staff Reporter - Wed, 17, Jun 2026
- 03:20 EDT
- 42
Chinmay A. Singh / Chinmay A. Singh via X
An Indian-American startup founder has hit out at India's taxation system for making equity ownership seemingly impossible for his employees.
Chinmay A. Singh, the founder of iWish.ai and SimplifiMed (now TeleVox Healthcare), criticized India's employee stock option (ESOP) taxation rules, claiming that "babu-made" rules were preventing startups from creating wealth for talented team members.
In a post on X, Singh noted that he hired software engineers for remote roles from smaller towns and cities instead of hiring from Bengaluru for his U.S. company. However, he lamented that he was unable to give them equity because that would end up costing his employees.
He noted, "The moment an Indian employee exercises their options (convert them to shares), without selling anything they get taxed on the paper gain as salary (I have heard it could be as high as 42%)."
He continued, "For a private company, no buyer, no liquidity, no cash. But they get slapped with a tax bill, sometimes larger than their salary, on money they haven't earned."
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Under India's current tax framework, employees are taxed on ESOPs at the time they exercise their stock options, with the difference between the fair market value and exercise price treated as salary income, even if the shares cannot yet be sold.
When those shares are eventually sold, any additional gain is taxed again as capital gains. To address concerns around this "tax before liquidity" problem, the government introduced a tax-deferral provision in 2020 for employees of eligible DPIIT-recognized startups, allowing ESOP taxes to be postponed until a later event such as the sale of shares or leaving the company, though the tax obligation is not eliminated.
Singh noted that his employees would end up having to pay lakhs out of their own pockets for shares they can't sell, or be forced to give up the equity.
Contrasting it with his experience in the United States, he said, "In the US, employees pay nothing until they sell, and if they hold long enough, they may pay almost nothing at all (federal)."
He further said, "I have heard that in India, there is a 'deferral' now. But if my info is correct, it covers ~2% of startups. Like most other startups, mine won't qualify."
Calling for reform, he said, "The fix is one line: tax the shares when they are sold, not when they are bought. Every developed country does it. India could do it tomorrow but it does not."
He concluded by saying that India is not changing its laws because of the bureaucrats in the country, noting that he does not blame India's Union Minister of Finance and Corporate Affairs, Nirmala Sitharaman.
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