FM alters FBT on ESOPs

NEW DELHI: Union Finance Minsiter P Chidambaram today altered the fringe benefit tax (FBT) on employees stock option plans (ESOPs) Now FBT on ESOPs would be calculated at the time of vesting the options to the employees and not at the time of allotment as proposed in the Union Budget. However FBT would have to be paid by employers, but they can work out with the employees as per the mutual arrangement.

During the debate on the finance bill in Loksabha, Finance Minister P Chidambaram said "FBT on ESOPs will stay. This is a worldwide practice. However, we are introducing some changes and the fair market value would now be determined at the time of vesting of ESOPs."

Budget 2007 had proposed that the fair market value of the fringe benefit would be determined in accordance with a prescribed method on the date of exercise of the option. It had proposed to include any specified security or sweat equity shares allotted by a company to its existing or former employees within the ambit of FBT. This has been changed and the fair market value would now be determined when the company entitles an employee to get ESOPs at any later date.