At last, Govt notifies Esop rules for fringe-benefit tax

Similarly, the rules do not spell out how Esops given by multinational companies to their expatriate employees in India would be taxed. The FBT will apply on Esops issued after April 1, 2007, official sources said. The notification came after considerable delay as the CBDT had to postpone the date of advance FBT payment. It first extended the date of first installment, payable by June 15 and clubbed it with the second installment, payable by September 15. As the guidelines on FMV still did not come, it further extended the date till December 15, the last date for paying third quarter installment of advance FBT..

Companies have to pay 15 per cent advance tax in the first quarter by June 15, 30 per cent each in the second and third quarters till September 15 and December 15 and the remaining 25 per cent by March 15. Esops were brought under the FBT net in this fiscal’s Budget. Initially, the FBT was proposed to be imposed at the time of exercising the stock option and not when the employee becomes eligible for that option. PricewaterhouseCoopers ED Govardhan Purohit said unlisted companies will have to obtain valuation certificates from the merchant bankers, which can be disputed by the revenue department.

The listed companies, he added, will be required to obtain certificate for the share prices from stock exchanges to avoid any valuation dispute. He said there are no guidelines for valuation of Esops of those companies whose shares are not traded for six months prior to the day of vesting of option.