Capital Gain on Transfer of Shares/Securities By An Employee Received as Stock Option/Sweat Equity Section 49

  • PROVISIONS AND RELATED ISSUES-

 

DIFFERENT SITUATIONS

ALLOTMENT OF SHARES/SECURITIES BY THE EMPLOYER-COMPANY TO ITS EMPLOYEES FREE OF COST OR AT CONCESSIONAL RATE

Tax on perquisite in respect of allotment of securities by the employer- company

If option is exercised by employee during 1999-2000 or after march 31, 2009, the perquisite is taxable.

Taxable value= fair market value on the date of exercise of option- acquisition cost paid.

Transfer of these securities by employees

Capital gain is taxable in the year in which securities are transferred.

If shares are allotted during 1999-2000 or after March 31, 2009, fair market value on the date of exercise of option.

  • If shares are allotted before April 1, 2007, the amount actually paid to acquire shares.
  • If shares are allotted on or after April 1, 2007 but before April 1, 2009, fair market value on the date of vesting of option.

Transfer of these securities by employees by gift or under an irrecoverable transfer

Capital gain is taxable in the hands of transferor in the year in which these securities are gifted.

Cost of acquisition in the hands of transferor would be taken as sale consideration.

Transferee will also be subject to tax under the head income from other sources.

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