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: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: cpt :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: VAT RATES :: due date for vat payment :: articles on VAT and GST in India :: TDS :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company
 
 
News Headlines »
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice
 Accepting payment under IDS 2016
 New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits
 Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi government
 Deadline to pay property tax in old currency extended
 Cabinet clears amendments to Income Tax Act

FBT on Esops to hit small cos harder
March, 26th 2007

Even as the Indian IT heavyweights are involved in hectic parleys with the finance ministry over fringe benefit tax (FBT) on Esops, it is the 5,500-odd small and medium IT companies that are struggling to come to terms with its ramifications. Some small companies which had decided to give Esops are now doing a rethink.

"We had planned to list ourselves in next 12 months. We have doled about 7% our equity in options but now we are struggling to see how we can get that right before we go for a listing," said Rajiv Mittal, vice-president, strategic planning JK Technosoft.

We had decided to dole out 15 lakh Esops to our employees with five lakh Esops over next three years. But with the FBT coming into play, we are thinking of rolling it back, said Sanjiv Bhavnani, CEO and MD, Visesh Infotecnics.

The finance ministry has imposed FBT on Esops in the recent budget. While the exact modalities and guidelines are being finalised, the most painful point on which FBT will pinch is talent retention. SME IT companies are already reeling under staff crunch and thwarting employee-defection to established players. FBT on Esops is going to hit them further.

"Mid cap and small cap IT companies cannot pay as much as MNC giants. They cannot offer brand value, as well. The only way they can attract talented employees is by giving a share in the company and showing them a dream of becoming a millionaire in two years once the company goes in for listing. But FBT may take that away, as well, said SL Ananthanarayan, CFO, Birlasoft.

Another company Eastern Software Systems (ESS), which is eyeing revenues of Rs 20 crore this fiscal, has dished out 5-7% of the equity in Esops. "The tax outgo will flow out of net profits and impact the cash flow of the company and reduce the profits.

We have to see if we can counter this by passing on the costs to employees, which again will be an unpopular move," said Anil Bakht, CMD of ESS, where Esop schemes cover 15-20% of employees.

Some companies are not yet clear who will bear the brunt of FBT on Esops the employer or the employee. Either way, FBT is going to hurt the industry," Mr Ananthanarayan added.

"We normally dole-out 3,00,000 options every year. Currently, we have about 15 lakh un-exercised options vested with our employees. An FBT on Esops will hit our net profit margins by 1-1.5%," said Jamshed Jussawala CFO Mastek.

According to industry experts, FBT on Esops may also breed unfair practices. Unlisted companies may issue options at jacked up valuations to minimise the difference on which tax will be levied.

Nasscom president Kiran Karnik said that all tax provisions in budget this year have been harsh on IT SMEs. Be it minimum alternate tax (MAT), service tax on leased land or FBT on Esops all provisions will hit SMEs hard. Small companies generally operate on leased land due to cash constraints or uncertainity over future expansion. Service tax on leased commercial land will hit them."

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

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