Taxation Of ESOP Benefits

An employee is taxed in India on obtaining any stock linked incentive during the course of his employment. The value of such benefit is treated as a perquisite which is taxable in the hands of the employee as a component of 'salaries'.

In case of globe-trotting employees of multinational companies, the question arises as to how the benefits of stock options would be taxable in India since such stock options would be granted, vested and exercised while the employee is in different countries. The New Delhi Bench of the Income Tax Appellate Tribunal (Tribunal) dealt with this issue in the case of ACIT v Robert Arthur Keltz. The Tribunal has held that such proportion of the stock option benefits as relates to the services rendered in India during the vesting period would be taxable in India. This alert by Khaitan & Co. summarizes the Delhi ITAT ruling.

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