Do ESOP benefits travel with you?

Many multinational companies are issuing benefits in the form of stock options to their employees, who are sent to different countries on deputation. Hence, the taxability of the employees’ stock options needs to be examined in the home country as well as host country. According to Indian domestic tax law, stock options granted to an employee are to be taxed at the time of allotment/transfer of shares. The ‘fair market value’ (to be determined as prescribed) as on the date of exercise, as reduced by the exercise price, is to be considered as a perquisite in the hands of the employee. However, the law is silent in the context of taxability of stock options of globally mobile employees. Hence, the issue arises as to whether the employee should be taxable on the entire perquisite value arising, or only on the proportionate period for which he/ she exercised employment while he/ she was in India. Furthermore, there is a question as to whether the period of proportioning the gain should be grant to vest, or grant to exercise.

Source : The Hindu Business Line