The value of any specified security or sweat equity shares allotted or transferred by the employer or former employer to the employee either free of cost or at concessional rate shall be treated as perk to employee. Such transfer to employee may be direct or indirect.
Note. If the specified security or sweat equity shares are allotted to employee/former employer at concessional rate, the value of perk shall be the amount of concession granted. Thus, any amount charged/recovered by the employer from the employee shall be reduced from the fair market value of security or sweat equity shares.
(a) Meaning of Specified Security. ‘Specified Security’ means the securities as defined in Section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where employees’ stock option has been granted under any plan or scheme therefore, includes the securities offered under such plan or scheme.
(b) Meaning of Sweat equity shares. ‘Sweat equity shares’ means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights or value additions, by whatever name called.
(c) Meaning of ‘Fair Market Value’. It means the value determined in accordance with the method as may be prescribed.
(d) Meaning of Option. It means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a pre-determined price.
(e) Year in which taxable. The value of this perk is. taxable in the year in which shares or securities are allotted or transferred to the employee but its fair market value shall be calculated on the date on which the employee exercises the option.