Fringe Benefit Tax -ESOP

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Preeti Moorkoth (Querist)
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29 May 2008 What is the FBT rate apllicable on ESOP? Would also like to know the surcharge or any other tax applicable on it

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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29 May 2008 This clause of Section 115WB (1)(d) considers the actual expenditure incurred by an employer towards any specified security or sweat equity shares allotted or transferred, directly or indirectly, either free of cost or at concessional rate to his employees [including ex- employee(s)], as a Fringe Benefit and hence makes it liable to Fringe Benefit Tax.

Valuation of fringe benefits:

100% of fair market value on the date on which the option vests with the employee as reduced by, or recovered from the employee in respect of such work security or shares shall be the value of Fringe Benefits chargeable to tax under this clause of Section 115WB (1)(d).

PLEASE NOTE:

Specified Securities & Sweat Equity Shares is defined to include the following:

SPECIFIED SECURITY means the securities as defined in Section 2(h) of the Securities (Regulation) Contract Act’ 1956 and includes Employees Stock Options.

SWEAT EQUITY SHARES means equity shares issued by a company to its employees/ directors at a discount or for consideration other than cash for providing know how or making available intellectual property rights or value additions by what ever name called.

ESOP’s have been introduced in the purview of Fringe Benefit Tax from the Assessment Year 2008-09.
30%tax+sc+ec+shec=33.99%