Nasscom opposes tax on ESOP

BANGALORE:The National Association of Software and Service Companies (Nasscom)

has requested the Centre to immediately remove the ``unfair taxation'' of

employee stock options (ESOP). According to Nasscom President Dewang Mehta, some

members of Nasscom had received notices from the Income-Tax Department demanding

compliance based on the assessment of stock options issued to their employees.

Nasscom has consistently taken the stand that it is necessary to popularize

stock options and enable professionals to create wealth, legally and ethically,

on their intellectual capital. Nasscom's position is that it is necessary to

allow professionals to hold on to the stock options and sell them at the time of

their choice and not be forced to sell prematurely to meet any tax demand.

Nasscom had suggested to the Government that stock options should be taxed,

but the point of taxation should be postponed to the point of sale rather than

the point of exercise. The rates of taxation could be different for the

difference between the grant value and the market value as on the date of sale,

but the point of taxation should be on sale. This view of Nasscom had been

accepted by the Prime Minister's IT Task Force, which had recommended that stock

options should be taxed on sale. A gazette notification to this effect had been

issued too.