At present, it is studying the matter and is likely to take a call on coming out with a clarification, prescribing the method to calculate the fair market value of unlisted shares.

An official, however, said, As of now, our earlier notification for FBT on Esops stands and merchant bankers will decide the method to calculate the value.

Many companies and tax experts have pointed out that while for listed companies, the departments rules are very clear, for unlisted companies a fair bit of confusion remains.

In its rules notified late last month, the department has not prescribed any particular methodology, only stating that it will be up to merchant bankers to calculate the fair market value for unlisted companies.

Experts say it can be calculated using a number of methods, which use different parameters and accordingly give different values. For instance, one of the ways of calculating the fair market value of a share is to use the profit earning capacity value of a company.

The fair market value under this method depends on estimated profitability of the company in future, taking into account various factors such as type of industry, economic risk, expected future contracts. Another method is the net asset valuation that calculates the fair market value by dividing the net worth of the company (as per its balance sheet) by the number of its shares.

Tax experts have also pointed out that it is not clear whether merchant bankers will have to use all methods for valuation and take their average or they can use the lowest valuation of the share. It would be useful to know what criterion should be used, they added.