Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: cpt :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: form 3cd :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: ACCOUNTING STANDARDS :: VAT RATES :: Central Excise rule to resale the machines to a new company :: empanelment :: VAT Audit
 
 
« News Headlines »
 How to calculate capital gains tax on property sold at less than stamp value?
 Return Filing - Under GST, this is how you will file tax returns from July 1
 Income tax filing FAQs part 1
 Filing Income Tax Returns? Things To Keep In Mind As Deadline Approaches
 Filing of online return for 4th quarter of 2016-17- extension of period thereof.
 New tax accounting standards may reduce leeway for infrastructure companies
 GST – CONCEPT & STATUS – As on 01st May, 2017
 Govt extends VAT deadline, relief for developers
 Income Tax Appellate Tribunal Rules, 2017
 Got your Form 16? You should file income tax returns early to enjoy benefits
 Want to save tax? Here are 6 best investment options for you

'FBT impact on Esops uncertain'
March, 06th 2007

The proposed law effective April 1, 2007 has shifted the focus from employee taxation to employer taxation on Esops. The benefit arising at the time of exercise of shares by the employees will be liable to FBT at an effective rate of 33.99%. Correspondingly, any benefit on account of Esops as perquisites is out of employee taxation.

Potential FBT impact is uncertain around the value of FBT to be taxed in the employers hands. Let us consider an example where employee A and employee B are granted Esops on the same date but they exercise on different dates. The exercise price is Rs 10.

Employee A exercises his options in year 3 when FMV on exercise date is Rs 30 and employee B in year 4 when FMV is Rs 40. The value of taxable benefit for FBT purposes will be Rs 20 and Rs 30 respectively. Therefore, even a different date of exercise could impact the FBT liability. Companies find themselves in a quandary as to which other factors may influence their FBT liability. In case of a globally mobile work force, there will be issues around double taxation where foreign companies grant Esops to their employees.

Foreign companies may be liable to pay FBT on Esops in India and the employee may suffer personal taxes in the home country on the same benefit, leading to double taxation.

Confusion also surrounds the impact of the proposed law on Esop variants such as restricted stock units and stock appreciation rights and nothing has been clarified at present. Some clarifications from the Government in this aspect are necessary. Taxation of Esops in the hands of the employer is something which does not find precedent in other countries. In fact, it is surprising to note that the government has sought to bring Esops within the FBT ambit, as clearly these are not in the nature of collective benefits but are employee specific.
 
In the United States, tax treatment of Esops depends on whether the stock option plan is qualified or nonqualified. Options provided to employees under qualified plans are not subject to tax at the time the option is granted or at the time the employee exercises the option and buys the stock. Tax is only levied as capital gains tax when the employee sells the stock.

Options provided to employees under a nonqualified plan are taxed when it is granted, if the option has a readily ascertainable FMV at that time. The exercise of a nonqualified stock option triggers a taxable event. An employee recognises ordinary income in the amount of the value of the stock purchased, less any amount paid for the stock or option. When the stock is sold, the difference between the sale price and the FMV at the date of exercise, if any, is taxed as capital gain.

Amarpal Chadha & Rohit Goyal Ernst & Young

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions