{"id":1930,"date":"2020-10-07T11:29:55","date_gmt":"2020-10-07T05:59:55","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=1930"},"modified":"2022-12-02T18:21:22","modified_gmt":"2022-12-02T12:51:22","slug":"sweat-equity-shares-meaning-merits-taxation","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/","title":{"rendered":"Detailed Guide on Sweat Equity Shares in India (2022)"},"content":{"rendered":"\n<p>You may have probably heard or read this a thousand times: finance is the lifeblood of a business. And so are employees; they are critical to a business\u2019s well-being as their efforts and hard work go a long way in its growth. That is why some companies reward their employees in addition to paying remuneration just to retain talented folks that contribute extraordinarily to the growth of the business. One such way they do this is to offer sweat <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> shares. Read what sweat <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-equity-shares-meaning-types-features-limitations-and-more\/\">equity shares<\/a> are, how they benefit the issuing company and employees, and recent developments in the space here.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Sweat-equity-shares-meaning\" title=\"Sweat equity shares meaning&nbsp;\">Sweat equity shares meaning&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Which-law-governs-the-issue-of-sweat-equity-shares\" title=\"Which law governs the issue of sweat equity shares?\">Which law governs the issue of sweat equity shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Conditions-applicable-to-the-issue-of-sweat-equity-shares\" title=\"Conditions applicable to the issue of sweat equity shares\">Conditions applicable to the issue of sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Who-can-issue-sweat-equity-shares\" title=\"Who can issue sweat equity shares?\">Who can issue sweat equity shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Which-employees-are-covered-under-the-sweat-equity-shares-scheme\" title=\"Which employees are covered under the sweat equity shares scheme?\">Which employees are covered under the sweat equity shares scheme?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#How-does-the-law-define-employees\" title=\"How does the law define employees?\">How does the law define employees?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#How-is-the-value-addition-defined\" title=\"How is the value addition defined?\">How is the value addition defined?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#How-many-sweat-equity-shares-can-a-company-issue\" title=\"How many sweat equity shares can a company issue?\">How many sweat equity shares can a company issue?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Valuation-of-sweat-equity-shares\" title=\"Valuation of sweat equity shares\">Valuation of sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Significance-of-sweat-equity-shares\" title=\"Significance of sweat equity shares\">Significance of sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Taxability-of-sweat-equity-shares\" title=\"Taxability of sweat equity shares\">Taxability of sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Calculation-of-fair-market-value-of-the-issue-of-sweat-equity-shares\" title=\"Calculation of fair market value of the issue of sweat equity shares\">Calculation of fair market value of the issue of sweat equity shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Quoted-sweat-equity-shares\" title=\"Quoted sweat equity shares\">Quoted sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Unquoted-sweat-equity-shares\" title=\"Unquoted sweat equity shares\">Unquoted sweat equity shares<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Sweat-equity-shares-vs-ESOP\" title=\"Sweat equity shares vs ESOP\">Sweat equity shares vs ESOP<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#FAQs\" title=\"FAQs\">FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#1-What-are-sweat-equity-shares\" title=\"1. What are sweat equity shares?\">1. What are sweat equity shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#2-To-whom-the-sweat-equity-shares-are-issued\" title=\"2. To whom the sweat equity shares are issued?\u00a0\">2. To whom the sweat equity shares are issued?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/#3-What-is-the-sweat-equity-shares-lock-in-period\" title=\"3. What is the sweat equity shares lock-in period?\">3. What is the sweat equity shares lock-in period?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"Meaning\"><span class=\"ez-toc-section\" id=\"Sweat-equity-shares-meaning\"><\/span><strong><strong>Sweat equity shares meaning&nbsp;<\/strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sweat equity shares are offered to selective employees and directors of a company as a reward for their contributions made to the company. It is defined under Section 2(88) of the Companies Act, 2013. The sweat equity shares are offered to the employees or directors for providing&nbsp;<\/p>\n\n\n\n<ul><li>Extraordinary contribution and hard work of an employee or director in the completion of a project<\/li><li>Technical know-how or expertise in an area of the business<\/li><li>Value addition made to business or contribution towards gaining intellectual property rights<\/li><\/ul>\n\n\n\n<p>Further, sweat equity shares are issued either by way of discount or consideration other than cash. They allow employees\/directors to participate in a part of the company\u2019s profits as a <a href=\"https:\/\/www.tickertape.in\/blog\/return-on-investment\/\">return on investment<\/a>. Now that you know what sweat equity shares are, read the laws that govern these.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Law\"><span class=\"ez-toc-section\" id=\"Which-law-governs-the-issue-of-sweat-equity-shares\"><\/span><strong>Which law governs the <\/strong><strong>issue of sweat equity shares<\/strong><strong>?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The issuance of sweat equity shares is governed by the Companies Act, 1956 and the Companies Act, 2013. In the case of an unlisted company, the entity has to abide by Section 54, read along with The Companies (<a href=\"https:\/\/www.tickertape.in\/blog\/share-capital\/\">Share Capital<\/a> and Debentures) Rules, 2014. And in the case of a listed company, the entity has to comply with the <a href=\"https:\/\/www.tickertape.in\/blog\/securities-and-exchange-board-of-india-functions-powers-and-regulations-of-sebi\/\">SEBI<\/a> Regulations besides the Companies Act, 2013.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Conditions\"><span class=\"ez-toc-section\" id=\"Conditions-applicable-to-the-issue-of-sweat-equity-shares\"><\/span><strong>Conditions applicable to the <\/strong><strong>issue of sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 54 of the Company Act, 2013 lays down conditions that a company has to comply with while issuing sweat equity shares. They include:<\/p>\n\n\n\n<ul><li>The company has to pass a special resolution with the approval of 3\/4<sup>th<\/sup> members<\/li><li>Sweat equity shares have to be allotted within 12 months from the date when the special resolution was passed<\/li><li>The special resolution has to mention details including the number of shares to be issued, consideration price, current market price, and employees and class of directors<\/li><li>In case the entity is a listed company, it has to abide by the SEBI Regulation, 2002, to issue sweat equity shares<\/li><li>In case the entity is a non-listed company, it has to abide by the rules prescribed in Section 54(1)(d)<\/li><li>The company has to be incorporated for at least a year<\/li><li>The company has to furnish proper justification for the value of sweat equity shares<\/li><li>The sweat equity shares are locked in for 3 yrs from the date of allotment<\/li><\/ul>\n\n\n\n<p>On meeting the above conditions and receiving the required approvals from the board and employees, the company can go ahead and make a private offer of sweat equity shares to the eligible employees.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Issue\"><span class=\"ez-toc-section\" id=\"Who-can-issue-sweat-equity-shares\"><\/span><strong>Who can issue sweat equity shares?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following companies can issue sweat equity shares:<\/p>\n\n\n\n<ul><li>One person company<\/li><li>Pubic company<\/li><li>Private company<\/li><li>Section 8 company<\/li><li>Listed or unlisted company<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Covered\"><span class=\"ez-toc-section\" id=\"Which-employees-are-covered-under-the-sweat-equity-shares-scheme\"><\/span><strong>Which employees are covered under the sweat equity shares scheme?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per Section 2(88) of the Companies Act, 2013, employees covered under the scheme are:<\/p>\n\n\n\n<ul><li>Directors or<\/li><li>Employees<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Define\"><span class=\"ez-toc-section\" id=\"How-does-the-law-define-employees\"><\/span><strong>How does the law define employees?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per Rule 8(1) of the Companies (Share Capital and Debentures) Rules, 2014, an \u201cEmployee\u201d means:<\/p>\n\n\n\n<ul><li>An individual who is a permanent employee of the company and has been working in or outside India for at least a year, OR<\/li><li>A director of the company, regardless of being a whole-time director or not, OR<\/li><li>An employee or a director as defined above of the entity\u2019s holding or subsidiary company in or outside India<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Value\"><span class=\"ez-toc-section\" id=\"How-is-the-value-addition-defined\"><\/span><strong>How is the value addition defined?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per Rule 8(1) of the Companies (Share Capital and Debentures) Rules, 2014, \u201cValue addition\u201d means actual or anticipated economic benefits that are created by the employees or directors and are either derived or are yet to be derived by the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Quantity\"><span class=\"ez-toc-section\" id=\"How-many-sweat-equity-shares-can-a-company-issue\"><\/span><strong>How many sweat equity shares can a company issue?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company can issue sweat equity shares up to the higher of the following:<\/p>\n\n\n\n<ul><li>15% of its existing paid-up <a href=\"https:\/\/www.tickertape.in\/blog\/equity-share-capital\/\">equity share capital<\/a> in a year<\/li><li>Equal to the value Rs 5 cr<\/li><\/ul>\n\n\n\n<p>Further, the sweat equity shares shouldn\u2019t exceed 25% of the paid-up equity capital of the issuing company at any point in time. However, there is an exception for startups. They can issue sweat equity shares of up to 50% of the paid-up capital within 5 yrs from the date of registration or incorporation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Valuation\"><span class=\"ez-toc-section\" id=\"Valuation-of-sweat-equity-shares\"><\/span><strong>Valuation of sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A registered valuer is appointed to determine the value of the intellectual property rights\/know-how\/value additions created with respect to which the company is considering the issue of sweat equity shares. The fair price of such equity shares to be issued is ascertained by a registered valuer, who is also required to justify their valuation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Significance\"><span class=\"ez-toc-section\" id=\"Significance-of-sweat-equity-shares\"><\/span><strong>Significance of sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now that you have read the legal part of sweat equity shares, understand how this type of equity is beneficial to the issuing company and employees\/directors receiving them.<\/p>\n\n\n\n<ul><li>Start-ups being fairly new in the business may be cash-strapped and unable to offer monetary rewards to their deserving employees. Thus, offering sweat equity shares can come in handy. They can simply reward employees by issuing them sweat equity instead of paying in cash. Not only start-ups, but well-established companies can also enjoy this benefit<\/li><li>To the employees, sweat equity shares act as a reward for the sweat that they <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> in a business and encourage them to stick with the company for longer<\/li><li>Sweat equity negates the need to raise funds by taking on debt<\/li><li>If an employee who has taken a pay cut in the initial days of the business, sweat equity shares make up for the loss they had faced earlier<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Tax\"><span class=\"ez-toc-section\" id=\"Taxability-of-sweat-equity-shares\"><\/span><strong>Taxability of sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sweat equity shares are taxable in the hands of employees when allotted or transferred if the following conditions are met:<\/p>\n\n\n\n<ul><li>The shares held by the employee are as defined in Section 2(h) of the Securities Contract (Regulation) Act, 1956<\/li><li>These securities are allotted or transferred on or after 1<sup>st<\/sup> Apr 2009. Any shares allotted or transferred before 1<sup>st<\/sup> Apr 2009 fall under the ambit lie of Fringe Benefit Tax<\/li><li>These shares are directly or indirectly allotted to an employee or former employee<\/li><li>Such shares are allotted by the employer or former employer<\/li><li>The shares were allotted free of cost or at a concessional rate<\/li><\/ul>\n\n\n\n<p>If the above conditions are met, sweat equity shares\u2014perquisite\u2014will be taxed in the hands of the employee in the year in which such equity shares were allotted or transferred.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"FMV\"><span class=\"ez-toc-section\" id=\"Calculation-of-fair-market-value-of-the-issue-of-sweat-equity-shares\"><\/span><strong>Calculation of fair market value of the <\/strong><strong>issue of sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If the above conditions are met, the taxable amount on the sweat equity shares is calculated based on their fair <a href=\"https:\/\/www.tickertape.in\/blog\/market-value\/\">market value<\/a> on the date when the shares were allotted or transferred by the employee. For this purpose, the fair market value of such equity shares is calculated as:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Quoted-sweat-equity-shares\"><\/span><strong>Quoted sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li><strong>In case the sweat equity shares are listed on 1 stock exchange:<\/strong> Average of opening and closing price of the shares<\/li><li><strong>In case the sweat equity shares of the company are listed on more than 1 stock exchange:<\/strong> Average of opening and closing price as per the stock exchange where the share is traded in the highest volume<\/li><li><strong>In case the share is not traded on the date of allotment or transfer:<\/strong> the closing price on any stock exchange as on a date closest to the date of transfer<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Unquoted-sweat-equity-shares\"><\/span><strong>Unquoted sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In case the shares are not listed on a stock exchange, then the fair value of such sweat equity shares as on the specified date is required to be determined by the merchant bankers. For this purpose, the \u2018specified date\u2019 is either:<\/p>\n\n\n\n<ul><li>The date on which the option shares are transferred OR<\/li><li>Any earlier date which doesn\u2019t fall before 180 days when the shares were transferred<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sweat-equity-shares-vs-ESOP\"><\/span><strong>Sweat equity shares vs ESOP<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Features<\/strong><\/td><td><strong>Sweat equity shares<\/strong><\/td><td><strong>Employee Stock Options Plan (ESOP)<\/strong><\/td><\/tr><tr><td><strong>Nature<\/strong><\/td><td>Sweat equity shares are offered to selected employees and directors as a consideration of their valuable contribution to the company.&nbsp;<\/td><td>ESOP is like an incentive provided to the employees. It is a right given to the employees to use their options to buy the company\u2019s shares.<\/td><\/tr><tr><td><strong>Allotment<\/strong><\/td><td>The employees or directors are allotted the shares at a discount or consideration.&nbsp;<\/td><td>Employees can avail their ESOP grant, and the shares can be purchased at a predetermined price on a future date.&nbsp;<\/td><\/tr><tr><td><strong>Eligible employees<\/strong><\/td><td>Permanent employees of the company or holding company or subsidiary working in or outside India.&nbsp;Full-time or part-time director of the company, holding or subsidiary company.<\/td><td>Permanent employee of the company or holding company or subsidiary working in or outside India.&nbsp;Full-time or part-time director of the company, holding or subsidiary company.<\/td><\/tr><tr><td><strong>Promoter or promoter group<\/strong><\/td><td>Eligible<\/td><td>Employees who are a promoter or from the promoter groups are not eligible<\/td><\/tr><tr><td><strong>Consideration for the purchase of shares<\/strong><\/td><td>Can be issued for cash at a discount or other than cash consideration.<\/td><td>It must be in cash.<\/td><\/tr><tr><td><strong>Lock-in period<\/strong><\/td><td>Minimum 3 yrs.&nbsp;<\/td><td>The company decides the lock-in period.&nbsp;&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Conclusion\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>All in all, sweat equity shares are beneficial to both the issuing company and the employee or directors who receive them. It helps the business retain its talented human resources and also raise funds in its initial stages without availing debt. To the employees, their sweat is rewarded appropriately and in case the company grows by leaps and bounds over time, as they can reap handsome returns.<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span><strong>FAQs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1669984553061\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"1-What-are-sweat-equity-shares\"><\/span>1. <strong>What are sweat equity shares?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Sweat equity shares are defined under Section 2(88) of the Companies Act, 2013.\u00a0It is offered to selected employees and directors of a company as a consideration of their valuable contribution to the company.\u00a0<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1669984574006\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"2-To-whom-the-sweat-equity-shares-are-issued\"><\/span>2. <strong>To whom the sweat equity shares are issued?\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The sweat equity shares are offered to certain employees and directors of the company working in India or outside India.\u00a0<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1669984599440\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"3-What-is-the-sweat-equity-shares-lock-in-period\"><\/span>3. <strong>What is the sweat equity shares lock-in period?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The lock-in period for the sweat equity shares is 3 yrs from the date of allotment.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Read about sweat equity shares in India, eligibility, conditions, taxability, how to calculate the sweat equity shares and how it is different from ESOP. <\/p>\n","protected":false},"author":90,"featured_media":1935,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1749,1721],"tags":[],"acf":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2020\/10\/Sweat-equity.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/1930"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/90"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=1930"}],"version-history":[{"count":10,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/1930\/revisions"}],"predecessor-version":[{"id":11254,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/1930\/revisions\/11254"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/1935"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=1930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=1930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=1930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}