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Capital gains on ESOPS

Kishan (Specialist) (206 Points)

10 April 2010

What cost of aquisition can be taken for calculation of capital gains on ESOPS.

One of my clients has aquired shares for RS. 3300 / -

He sold proceeds for Rs.493218 / -

with in a month i.e June 2009

How to calculate the tax ??

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 10 April 2010

ESOP is a scheme through which a company allots shares to its employees by virtue of their employment, on satisfaction of the conditions laid down in the scheme. The company may or may not charge any amount for allotting these shares to its employees. When the employees sell these shares, capital gains will arise and the nature of capital gains will be based on the period of holding of these shares by the employees. The capital gains will be the sale consideration received on sale of these shares. If the employees had incurred any cost at the time of exercising their options, then such cost can be reduced from the sale consideration. The option of indexation can be utilized if the same is beneficial to the employee. If the employee transfers the shares allotted to him/her under ESOP, by way of gift, then the fair market value of the shares as on the date of such transfer will be deemed to be the sale consideration of such shares. Receipt of actual consideration is not necessary for taxing the gift of shares allotted by way of ESOP. The employee would be deemed to have sold these shares at the fair market value as on the date of the gift.

regards,

ratan

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Amir (Learner) (4016 Points)
Replied 10 April 2010

Dear Kishan,

The law regarding taxability of ESOPs have seen changes -

Crucial thing is when ESOP's was alloted in order to determine its Cost of Acquisition -

1) If alloted upto 31.03.2007 - Sum paid to employer.

2) If after 31.03.2007 - FMV as on the date of vesting.

Tax will be calculated in a usual manner depending upon the period of holding, etc

Kishan (Specialist) (206 Points)
Replied 10 April 2010

Originally posted by : Amir
	Dear Kishan, The law regarding taxability of ESOPs have seen changes - Crucial thing is when ESOP's was alloted in order to determine its Cost of Acquisition - 1) If alloted upto 31.03.2007 - Sum paid to employer. 2) If after 31.03.2007 - FMV as on the date of vesting. Tax will be calculated in a usual manner depending upon the period of holding, etc