An ESOP (employment share ownership program) is an entity created by an employer to hold securities for the benefit if its employees. Here the employer sets up ESOP entity so that each company employee receives a membership share from the entity. The income earned from ESOPs has tax advantages as it falls under capital income. The ESOP scheme provides flexibility as it incorporates securities of parent company along with its employer securities. Although ESOP is a lucrative scheme for payments it has some pitfalls. Remuneration policy and contracts need to be framed.To ensure unwarranted discrimination or to avoid any restriction on the owners' decision-making rights. An ESOP is not an alternative channel for regular salary payments rather, it's a vehicle for payments of bonuses and other awards. Read more at https://www.hg.org/article.asp?id=43423