Taxation of esop

This query is : Open

Ravi Rawat (Querist)
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27 December 2013 Mr. A while in employment of an Indian subsidiary (XYZ Pvt. Ltd.)of foreign company (XYZ Inc, USA) received Stock Options of XYZ Inc. during 2004-05 with vesting period of 3 years.

Mr. A transferred to the parent company in USA

Mr. A exercised the option during FY 2010-11. He was non-resident during FY 2010-11, working in USA with parent company.

There was a gain on exercise of option of Rs. 1,00,000/- (difference between FMV and exercise price. There was no capital gain since it was a cashless transaction and stocks were transferred at the time of exercise only.

Ordinarily, had Mr. A been a resident in India and an employee of XYZ Pvt. Ltd. upto the FY 2010-11, the total amount would have been taxable as perquisite under salary.

Facts to be considered:
1. He was non-resident during FY 2010-11 (year of exercise)

2. During the vesting period of 3 year - he was in employment of Indian company for 2 years and US company for 1 year. (most important condition)

How would this transaction be taxable in India?