Tax Law

Legal services are taxable at 18% GST. However, individual advocates (sole proprietors) providing legal services to other advocates or law firms are exempt from GST registration obligations. Legal services provided by an individual advocate (not a firm or LLP) to a non-business client (individual) are also exempt. When a law firm (partnership, company, or LLP) provides services to a business entity, GST at 18% applies under the reverse charge mechanism — the recipient business entity is liable to pay the GST.

ESOP income is taxed at two stages: (a) at exercise — the difference between the fair market value on the date of exercise and the exercise price is treated as a perquisite (salary income) and taxed at the employee's applicable slab rate; (b) at sale — the difference between the sale price and the FMV on the date of exercise is capital gains (short-term if held less than 12 months from exercise, long-term if held more than 12 months). For DPIIT-recognised startups, tax on the exercise perquisite is deferred until the earlier of sale of shares, 48 months from the end of the assessment year of exercise, or employment cessation.