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Calculation and Payment of FBT

A summary of Indian Income Tax laws on calculation of Fringe Benefit Tax on Stock based Compensation.

RSU’s (Restricted Stock Units)
– Tax on Fair Market Value of shares on vesting
– Payable when shares are “allotted” or transferred to the employees

ESPP’s
– Tax on the Discount on purchase
– Payable on purchase

Options
– Calculation, Spread being difference between fair market value on vesting and exercise price
– Payable at the time of exercise

more info at Hindu. Current FBT rate is at 33.99%

4 replies on “Calculation and Payment of FBT”

Hi,

Is the FBT payed by the employer or the employee? what does the majority of the company doing ?

I heard some have given option for people to move away from RSU to stock. Can you help me on some inputs ?

as per the IT rules, the FBT is payed by the company. however they are allowed to recover this expense from the employee.

//I heard some have given option for people to move away from RSU to stock//
I think you mean that some company r giving RSU/stocks instead of the earlier practice of giving options.
Yes that is a global phenomenon and a welcome practice.

Reasons:
1) Options scandal: last year about 60-70 US firms were charged (and many punished) for backdating of options… hence many companies are forced/advised against backdating.
2) even though options are perceived as a cash benefit for the employee.. on the books of the company, its cost is zero.. while RSU/complete stock can be easily valued at the present value of the stock.. hence its a step towards a more realistic accounting practice.

i hope that helps

hi, i got RSU’s grant on 12-mar-2007 and got them vested on 12-dec-2009 of an mnc, my ctc is around 2.5 lakhs and my employer is saying that they will deduct tax on RSU @ 30% from feb and mar salaries, i have already shown an investment of 1lakh so will i get refund or what is that i have to do to save myself from FBT

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