Compensation for reduction in ESOP value

Tax queries 4374 views 7 replies

Whether compensation paid  for reduction in ESOP value is taxable or not  tds deducted under 192 for the said payment 

Replies (7)

Yes, Taxable...            

It means it shall be considered as perquisites or benefits under Section 17(2)(vi)

If I am not wrong,

Other issue is related to SAR award whether the are also considered to be perquisites benefits of taxes under head salary of capital gain

 

  • The Madras High Court and some tax authorities take a view and consider the compensation a taxable perquisite under the “Salaries” head if paid due to employment and not linked to transfer of capital asset.

 

 

  • When SARs are exercised and settled in cash, the payout is considered salary income taxed as a perquisite under section 17(2) of the Income Tax Act, and employers are required to deduct TDS under section 192.

  • If SARs are settled by allotment of shares and the employee subsequently sells those shares, the gain arising from the sale (difference between sale price and market value at exercise) would be taxed as capital gains—but the initial value received at exercise (market value minus grant price) was already taxed as a perquisite.

Thank you sir for your prompt response 

You are welcome.             

In case SAR right are not exercised and relinquishment settled in cash what will be the correct treatment for taxation either as perquisites or capital receipt

Perquisites under Salary...


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