Lets Help You Manage Your NRI ESOP

Yes, NRIs are allowed to open a trading account in India with the sole objective of selling the shares acquired under the ESOP scheme.
The listed Indian Companies are allowed to issue shares under the Employee Stock Option Scheme (ESOP) to the employees who are residents outside India. The shares under ESOP come under the Non-PIS category. Thus, an NRI can open an NRE or NRO trading account along with NRE/NRO Demat and bank account based on whether an NRI wants to acquire the shares with or without repatriation benefits.

An NRI can exercise an ESOP through NRE or NRO trading, bank, and Demat account.
The listed Indian Companies are allowed to issue shares to its employees including employee's resident outside India except to the citizens of Pakistan. The ESOPs are issued with a waiting period known as the vesting period. The vesting period generally ranges from 3-5 years. Once the waiting period is over, an NRI can exercise their right to purchase the shares allotted to them under ESOP at a pre-determined price within a specific timeframe.
The shares under ESOP come in the Non-PIS category. An NRI can purchase the shares by using the funds either from the NRE account or NRO account based on whether the shares are to be held with or without repatriation benefits.
The shares acquired under ESOP are taxed at the time of exercising the stock option. The benefit received as a difference between the Fair Market Value and the value at which the ESOP gets taxed as a perquisite in the hands of the NRI.
Note: Exercising an ESOP is an option and not mandatory. Thus, an NRI may or may not opt to exercise their right to purchase the ESOP at its will.

ESOPs are taxable in India under two instances:
• At the time of exercising the option
• At the time of selling the option
• Taxation at the time of exercising the option: The difference between the Fair Market Value and the pre-determined price at which the shares under ESOP are issued is taxed as a perquisite in the hands of the employee as per their income-tax slab.
• Taxation at the time of selling the option: The difference between the selling price and the price at which the ESOP was exercised is taxed as a capital gain. The tax rate would depend based on the holding period of the stock and would get taxed as either a Long term Capital Gain or a Short term Capital Gain.