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 (long-term if listed shares are held for more than 12 months, or unlisted shares for more than 24 months, from exercise). For eligible startups (DPIIT-recognised and certified by the Inter-Ministerial Board), tax on the exercise perquisite is deferred until the earliest of sale of shares, 48 months from the end of the assessment year of exercise, or employment cessation. These rules are stated under the Income-tax Act, 1961; from 1 April 2026 the Income-tax Act, 2025 applies and renumbers the provisions.