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ESOP Tax
Perquisites
ESOPs at the time of exercise form part of the salary. The price of its issue is pre-determined and the difference between the fair price of the shares and its issue price becomes a prerequisite. As per the IT rules, the taxable value of the ESOP on exercise is Fair Market Value (FMV) of the share on the date of allotment / transfer of shares - Exercise Price paid by the employee.
ESOP Tax Perquisites for Unlisted Companies
Compliance with Income Tax Act 1961:
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Governed by Section 17(2)(iv) of the Income Tax Act, 1961, read with applicable rules.
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Valuation Certificate requirement: An unlisted company must obtain a valuation certificate from a Category 1 Merchant Banker registered with SEBI as of a date not earlier than 180 days prior to date of exercise.
ESOP Tax Perquisites for Listed Companies
Compliance with Income Tax Act 1961
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Governed by Section 17(2)(iv) of the Income Tax Act, 1961, read with applicable rules.
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Valuation Certificate requirement; There is no valuation requirement, when ESOPs are exercised by the employees.
Key Points to Consider
01
Which is the governing law for Unlisted
Income Tax Act 1961
02
Which is the governing law for listed
Income Tax Act 1961
03
Who does the Valuation
Merchant Banker
04
When valuation is required
At the time of Exercise of ESOPs
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