27 December 2013
Mr. A while in employment of an Indian subsidiary (XYZ Pvt. Ltd.)of foreign company (XYZ Inc, USA) received Stock Options of XYZ Inc. during 2004-05 with vesting period of 3 years.
Mr. A transferred to the parent company in USA
Mr. A exercised the option during FY 2010-11. He was non-resident during FY 2010-11, working in USA with parent company.
There was a gain on exercise of option of Rs. 1,00,000/- (difference between FMV and exercise price. There was no capital gain since it was a cashless transaction and stocks were transferred at the time of exercise only.
Ordinarily, had Mr. A been a resident in India and an employee of XYZ Pvt. Ltd. upto the FY 2010-11, the total amount would have been taxable as perquisite under salary.
Facts to be considered: 1. He was non-resident during FY 2010-11 (year of exercise)
2. During the vesting period of 3 year - he was in employment of Indian company for 2 years and US company for 1 year. (most important condition)
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