With the finance ministry deciding to retain employee stock option plans (Esops) under the fringe benefit tax (FBT), employers are gearing up to pass on the liability to the large number of employees who did not exercise their options before the March 31, 2007 deadline. According to the Budget proposal, employers will have to pay 33.99% FBT on stock option gains, but can deduct the amount from employees salaries.

FBT is applicable from April 1, 2007. Despite the fact that many companies encouraged employees to exercise their options before FBT came into play, as on March 31, the outstanding options of these companies run into crores of rupees.
 
Among IT companies, HCL has the highest number of outstanding options at 5 crore. The options, with a value of $7.2 million as on March 31, will vest in tranches from 2007 to 2012. Infosys, which pioneered Esops in India, has about 40 lakh options outstanding. The average exercise price is Rs 900 for the 1998 plan and Rs 1,100 for the 1999 plan, said V Balakrishnan, CFO, Infosys Technologies.

Similarly, Satyam Computers has 260 lakh outstanding options. Since many employees were not in a financial position to turn their options into shares at that stage, banks like SBI and IL&S came forward for funding, said a Satyam spokesperson.

Wipro has 125 lakh outstanding options and 30 lakh restricted stock units as of March 31.