NEW GUIDELINES FOR FBT ON ALLOTMENT OR TRANSFER OF ESOPs

Method of computation of the value of the fringe benefit value of the fringe benefit

It has been provided that the value of fringe benefit shall be determined in accordance with the formula

A - B

Where, A = the Fair Market Value (FMV) of the specified security or sweat equity shares on the date of vesting of the option; and B = the amount, if any, actually paid by, or recovered from the employee; The expression fair market value has been defined to mean the value determined in accordance with the method as may be prescribed by the Board. Option has been defined to mean a
right but not an obligation granted to an employee to apply for the specified security or sweat equity
shares at a predetermined price. The method for determination of fair market value of specified security or sweat equity share, being a share in the company:

• In a case where, on the date of the vesting of the option, the share in the company is listed on a recognized stock exchange, the fair market value shall be the average of the opening price and closing price of the share on that date on the said stock exchange;
• If on the date of vesting of the option, the share is listed on more than one recognized stock exchanges, the fair market value shall be the average of opening price and closing price of the share on the recognized stock exchange which records the highest volume of trading in the share;
• If on the date of vesting of the option, there is no trading in the share on any recognized stock exchange, the fair market value shall be,-
• the closing price of the share on any recognised stock exchange on a date closest to the date of vesting of the option and immediately preceding such date; or
• the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of vesting of the option and immediately preceding such date, is recorded on more than one recognized stock exchange.
• In a case where, on the date of vesting of the option, the share in the company is not listed on a recognized stock exchange, the fair market value shall be such value of the share in the company, as determined by a Category 1 Merchant Banker registered with the Security and Exchange Board of India, on the specified date.
• The specified date has been defined as to mean-
• the date of vesting of the option; or
• any date earlier than the date of the vesting of the option, not being a date which is more than 180 days earlier than the date of the vesting.