Vesting
Also known as: Earning Rights, Stock Vesting
The process by which employees earn rights to ESOPs or RSUs over time, typically following a predefined schedule.
Detailed Explanation
Vesting is the schedule that determines when employees gain ownership rights to their ESOPs or RSUs. Common vesting schedules include 4-year vesting with 1-year cliff (25% after year 1, then monthly). For RSUs, vesting triggers immediate perquisite tax. For ESOPs, vesting only provides the right to exercise - tax occurs later at exercise.
Related Calculators
Related Terms
ESOP
Employee Stock Option Plan - A benefit plan giving employees the right to buy company shares at a predetermined exercise price.
RSU
Restricted Stock Units - Company shares granted to employees that vest over time and are taxed as salary when vested.
Exercise
The act of purchasing ESOP shares by paying the exercise price, triggering perquisite tax liability.
Perquisite Tax
Tax on employment benefits valued in money, including ESOP exercise gains and RSU vesting, taxed as salary income.