16 February 2011
My company has allotted me 25000 equity shares @31.50/share under ESOP scheme in Sept 2010. At the time of allotment average price of share was Rs.117. And the margin of Rs.85.50(117-31.50) has been taxed @ 30% as my salary including ESOP benefit is more than 8 lakhs. I have availed a loan of Rs.14,28,750/- for the purchase of shares including for tax payment. [25000*31.50+(25000*(117-31.50)*30%)]. That is I have paid tax of Rs.6,41,250/- for a nominal income. In Feb 2011 the share price has come down to Rs.89, and I have sold 16400 shares @ 89.50 to clear the loan including accrued interest from Jan 2011.
Now look at the pity situation. Our govt has taxed me Rs. 6,41,250/- for an income which was not really accrued to me. As per the present law the relaxation available to me is the setoff of Short Term Capital loss of Rs.1,03,125/-[(117 89.5) *25000*15%] against capital gains. And I do not have any capital gain.
What should I do against this unfair practice of law for taxing an unrealized income ?
17 February 2011
Hi, Can understand your emotions, However taking a stand that ur been taxed on an unrealised sum may not be correct as youR cost of acquisition @ the time of sale would be Rs.117/ share & not Rs.31.5/ share.
Be happy that they have not given a provision to the effect that your Actual cost of Rs.31.5/share is the Cost of Acqusition.
Either ways... Had they told that the Cost of Acqusition is amount which you have paid to the Co, i.e Rs.31.5/share, then you would have ended up having a Huge taxable Capital Gain...
So it Evens Out...
The Provisions of ESOP under Income Tax Act 1961 is a Master piece, no Doubts about it!!!!
May be you should do a bit of Tax-planning before being Emotional.
For Further clarification pls Join to my community "Lo Aca"
Regards CA. LOHITH.J B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons
CAclubindia
