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Fair market value for Fringe Benefit Tax levy

Kamal Narang

Tax point: The Finance Minister, Mr P. Chidambaram, with the Revenue Secretary, Mr P. V. Bhide, at the annual conference of Chief Commissioners and Directors General of Income-Tax, in New Delhi on Tuesday. —

Our Bureau

New Delhi, July 17 The Finance Minister, Mr P. Chidambaram, on Tuesday said that guidelines for computation of fair market value for the purpose of levy of fringe benefit tax (FBT) on Employee Stock Options (ESOPs) would soon be issued by the Revenue Department.

“There is no ambiguity in ESOPs taxation. The guidelines (for determining the fair market value) would be issued shortly,” Mr Chidambaram told reporters after addressing the 23rd annual conference of Chief Commissioners’ and Directors General of Income Tax here today.

While recommending the passage of Finance Bill 2007 in Lok Sabha on May 3, the Finance Minister had said that FBT on ESOPs was here to stay. He had then announced that the fair market value of ESOPs for the purpose of FBT would be calculated on the date when employees become eligible (vesting date) for ESOPs and not the date of allotment or transfer of shares.

He had also said that FBT would be collected only on allotment or transfer of the shares and the period of holding of the ESOP would also be reckoned from the date of such allotment or transfer.

As part of the amendments brought out on May 3, the Government had made the recovery of FBT on ESOPs by the employer from an employee a legally valid transaction.

In Budget 2007-08, Mr Chidambaram said that perquisites to employees through the stock options would be taxed as fringe benefits in the hands of employers.

Related Stories:
Is it the end of ESOPs?
`No rethink on Fringe Benefit Tax on ESOPs'
Fringe benefit to employer from FBT on ESOP
FBT on stock options: Sacrificing equity for the sake of convenience

More Stories on : ESOPs | Income Tax

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