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The Institute of Chartered Accountants of India has offered technical information for drafting the rules for valuing employee stock options for calculating the fringe benefit tax.
This government had brought stock options under the ambit of the tax in this year's Budget.
The imposition of FBT on employee stock option plans may lead to restructuring of employees' salary package in the corporate sector.
"We have suggested to the finance ministry that the institute can play a useful role in addressing the issues related to accounting valuation of ESOPs," said G Ramaswamy, chairman of the Fiscal Laws Committee of the body.
Under the proposal, any specified securities or sweat equity shares allotted "directly or indirectly" by the employer free of cost or at concessional rate to the employees (including former) will be considered as fringe benefit.
After Budget 2007-08, Finance Minister P Chidambaram had said that the value of the FBT would be determined through a prescribed method. FBT will be levied at 30 per cent on the gains after deducting the cost of acquiring the shares.
The institute has said that the phrase "directly or indirectly" may result in litigation. Many foreign companies issue shares to their associates in India who assist them in business process outsourcing. The person getting such shares may not be a direct employee of the company that is issuing such shares, the institute has said.
However, the phrase "directly or indirectly" may be interpreted to cover such transactions, the institute had said in its post-Budget memorandum to the finance ministry.
Further, the shares allotted by foreign companies may be listed abroad or may not be listed. Similarly, companies giving shares in India may not be listed on stock exchanges. All these would lead to controversy over valuation of the allotted shares.
