New Delhi, Dec. 18 -- Stock-based compensation has emerged as a key wealth-building tool for employees, particularly in startups and large listed companies. Esops, RSUs and ESPPs all offer a way to participate in a company's growth, but they differ sharply in how shares are granted, when employees become owners, how liquidity works, and-most importantly-how and when taxes are levied.

These differences can have a material impact on cash flows, risk and eventual returns. Understanding how shares are acquired and taxed under each structure is critical before opting in, as tax liabilities often arise well before any actual cash gains are realised.

Employee stock option plans, or Esops, allow companies to reward employees by giving them the ...