Plz tell me About taxability of Employee Stock Option in an employee exercised ESOP after 1/4/09. and in whose hand it will be taxable. plz give an example
3 Replies
Sumiti Jain
(FP)
(1364 Points)
Replied 11 March 2010
If the Employees’ Stock Option plan or scheme is in accordance with the guidelines issued by the Central Government, no perquisite value on account of stock option would be considered for taxation as perquisite under section 17(2) of the Income-tax Act, 1961 as it stood at the relevant time and vice versa.
Sumiti Jain
(FP)
(1364 Points)
Replied 11 March 2010
Amendment of section 17(2): With the withdrawal of fringe benefit tax, the incidence of tax on employees will be more from assessment year 2010-11. Section 17(2) shall be widened by three more clauses viz. clauses (vi), (vii) and (viii).
Clause (vi): value of specified security under ESOP or sweat equity shares: FMV on the date of exercise of option as reduced by the amount, if any actually paid by or recovered from the employee shall be the value of perquisite. It is seen that the provision relating to ESOP/sweat equity shares which was introduced in assessment year 2000-01 (omitted from assessment year 2001-02) has been restored.
Method of determining fair market value shall be prescribed by the CBDT. It is not certain whether the existing rule for determining fair market value for the purpose of FBT will be considered by the CBDT.
Section 49(2AA) has been amended to provide that where the employee sells the security or sweat equity shares, for the purpose of computing capital gain cost of acquisition of such security or shares shall be the fair market value considered for perquisite valuation.
Clause (vii)- Employer’s contribution in respect of the employee in excess of Rs. 1 lakh to an approved superannuation fund shall be a taxable perquisite.
Clause (viii) - value of any other fringe benefits/amenities as may be prescribed.
Poornima Srinivasan
(Junior trainee)
(330 Points)
Replied 11 March 2010
Visit the below site for some guidelines under SEBI for ESOP.
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