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    FBT on ESOP - Not Finalized


    Hi,

    I believe everyone who is working in a Public sector organization is aware of the FBT on ESOP. FM declare this without any protocols in place. Will anyone help me to find out from the FM or ministry on what basis they declared in the budget and the guidelines haven't been finalized till now. Does the FM know anything about this or was a random proposal like lottery ?

    Please help.

    Thanks
    -Bapi


    › Find content similar to: FBT on ESOP - Not Finalized



  2. #2
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    Re: FBT on ESOP - Not Finalized


    The full proposal/details of FBT on ESOP's is still not out.
    Might not be a random proposal like lottery but definitely one of those lonely and isolated "foundation stones" dotting the landscape.

  3. #3
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    Re: FBT on ESOP - Not Finalized


    Fin Min notifies guidelines for FBT on ESOPs

    The Finance Ministry has notified the guidelines for FBT on ESOPs. For listed entities,the fair or FMV will be determined on the date of vesting, reports CNBC-TV18.

    FMV will be the average of opening and closing quotes of the scrip. For unlisted companies, the FMV will be determined by a Merchant Banker, on the vesting date.

    The FBT will be 30% of the difference between FMV and the price that employee pays. The tax liability will be calculated as on the vesting date.

    CNBC-TV 18 has learnt that for listed companies the fair market value of the shares will be valued on the date of vesting. The fair market value will be the average of the opening and the selling price of the stock on the vesting date.

    The Fringe Benefit Tax, or FBT, will be 30% of the difference between the fair market value and the price, which the employee pays for the shares.

    For unlisted companies, the fair market value will be a value that is determined by a merchant banker. The FMV will be calculated as on the date of vesting of the shares with the employee. The Fringe Benefit Tax will then be calculated in the same way as that for listed entities.

    Seven months after the Minister said that ESOPs would be subject to fringe benefit tax, the rules have been notified and the tax in the case of listed ESOPs will be calculated on the fair market value.

    The fair market value is the average of the opening and closing price of the stock on the vesting date. But the liability will arise on the date that the shares have been transferred.

    If the shares were vested in March, but it was transferred to your demat account in April, then the fringe benefit tax will have to be paid. It will be deemed, to have been transferred to your account, from this year onwards.

    In the case of unlisted companies, the fair market value will be calculated according to valuations certified by a merchant banker. The capital gains, if any, that arise out of sale of the ESOPs will be calculated on the selling price minus the valuation price.

    The employer is entitled to recover the tax that it pays from the employee. But the tax that has been recovered from the employee cannot be added to the valuation price.



    Moneycontrol India :: News :: Fin Min notifies guidelines for FBT on ESOPs :: :: Business :: Finance Ministry ,FBT,ESOPs


    Last edited by karira; 23-10-07 at 07:51 PM.

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    Re: FBT on ESOP - Not Finalized



    Thanks a lot. It's really a very nice site and the creator of this site are pro active enough to answer the queries. Please accept my sincere thanks.

    I would like to know the answer of the final query. A person of Indian origin who is in USA for almost 2 and half years and have the shares from an Indian company. Will he also pay the FBT ?

    Thanks Again,
    -Bapi

  5. #5
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    Re: FBT on ESOP - Not Finalized


    If the shares have been vested under ESOP and demated after 01.04.2007 to the employees' account, then the employer is bound to pay the FBT and inturn is entitled to recover the same from the employee.
    Defeat is not final when you fall down. It is final when you refuse to get up.

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    Re: FBT on ESOP - Not Finalized


    Hi,

    I have the shares in my Demat A/C as of March 2007. Will this be taxed under FBT?

    Regards

    Venkat

  7. #7
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    Re: FBT on ESOP - Not Finalized


    Quote Originally Posted by bapi View Post
    Thanks a lot. It's really a very nice site and the creator of this site are pro active enough to answer the queries. Please accept my sincere thanks.

    I would like to know the answer of the final query. A person of Indian origin who is in USA for almost 2 and half years and have the shares from an Indian company. Will he also pay the FBT ?

    Thanks Again,
    -Bapi
    FBT is a Tax on Companies and not on individuals.
    Your company will be paying FBT.
    They have the option of recovering it from you.
    However, you will be liable for Capital Gains Tax , as and when you sell the ESOP's.
    This is irrespective of whether you hold a Indian Passport (NRI Status) or you are a PIO card holder or you ar a Dual Citizen or a Foreign citizen because the incidence of Capital Gains will be in India.
    Please reconfirm this with a Tax Consultant.

    Venkatb,
    Hope this answers your querry too.
    Last edited by karira; 24-10-07 at 06:51 PM.

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    Re: FBT on ESOP - Not Finalized


    Hi -
    I have a related query. I had some stocks given to me in April 2004 and Jan 2005. The first one vested April 2005,6,7 and 2008 and the second vested on April 2006,7 and 2008. I had been in USA from Sep 2003 to May 2005. The Circular (9/2007) says that the period that the individual stays at onsite will be calculated and the proportionate FBT need not be paid. But my company insists that I should have a Demat account to claim this proportionate Discount on the FBT. How can I have a NRI Demat account when I have returned in 2005? Are they Justified in their position? Pls do let me know.

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