ESOP

Dear Sachin,

I think u r talking about the case where ESOP's of Holding Co. are issued to the employees of Indian Subsidary.

The laws on Taxability of ESOP's have seen many changes, I m supposing that shares were alloted to u on 30.03.2007 -

Not taxable as perks in the year of 2006-2007, Capital gain Tax (after considering the cost which u have paid for acquisition of shares) is to be paid in the year of transfer/sale of ESOP's - i:e 2009-2010

If shares were alloted to u on or after 01.04.2007 to 31.03.2009 - Not taxable as perks (since employer had paid FBT on FMV), Capital Gain Tax (after considering the FMV used for FBT) is to be paid in the year of sale/transfer - i:e 2009-2010

Now one thing is sure if u r a resident then u have to pay Capital Gain Tax in this Financial Year, the only thing is to see what cost is to be taken i:e

If Alloted upto 31.03.2007 - Sum paid to employer.

If alloted between 01.04.2007 - 31.03.2009 - FMV

Since u have mentioned that ur exercised Price was the FMV then I think computation will be same in both the cases...........

Dear Mr. Amir,

I am in a similar situation as Mr. Sachin. I work for an Indian subsidiary of a US company, which has been listed on NASDAQ. My query pertains to the tax rate for the capital gains from the sale of ESOPs

Example:

Issue Price: X

Vesting Price: Y

When I excercise my options, the perquisite tax will be calcuated on (Y-X)

Suppose I sell the shares at Z, I have to pay capital gains on the amount (Z-Y).

Is the tax 10% of the capital gains in the short term & NIL for long term (similar to companies listed on BSE/NSE) ? Or is there a difference in the tax of capital gains of stocks of foreign listed companies ?

In addition, can I declare this income while filing my returns or should I pay advance tax in the same quarter I sell the shares...?

Regards

Dear Sir,

Your computation of Capital Gain is correct i:e Z- Y, if shares are alloted to you on or after 31.03.2007.

Where Z is the Sale Price & Y is the FMV on the date of vesting.

Now since u mentioned that Company is listed on NASDAQ so the benefits of exemption of LongTerm Capital Gain or the discounted rated in case of Short term will not be avialable since in this case the sale will not suffer the burden of Securities Transaction Tax (STT) which is levid if transaction are made on NSE/BSE .

So any short term gain will be taxable like any other Income as per ur slab.

And in case of Long term, exemption will not be available but Tax rate will be 20% & u can index the cost of acquisition i:e Y.

To aviod any interest you should pay advance tax otherwise you can also disclose the transaction to ur employer & he will go on to make a deduction of Tax (on this Capital Gain) from ur salary in the form of TDS.

The above reply is based on the assumption that ur status is that of a Resident & Ordinarily Resident..

Dear Mr. Amir,

Thanks a lot for the clarification.

Regards,

-Sathish

Dear Amir,

i just wanted to clarify that how can we determine whether the securities fall under STCA or LTCA?

Secondly, i read in odther queries that if there is STCG than tax liabiltiy would be 33.36% and not as per slab rates!

kindly clarify...

thanxs and regards.

Securities listed on stock exchanges in India and equity based mutual funds are short term capital assets if held for less than 12 months and long term capital assets if held for more than 12 months. Tax rate of LTCG on securities that suffered STT is different from normal slab rate (15% as per my knowledge however readers may please update).