ESOPS Fringe Benefit Tax?

Question

hello,
I have esops of my company and want to know tax implication in following scenario:-
1> if I transfer my shares (off market) to brother before 31/03/2007, what tax I need to pay and how much tax my brother need to pay when he sells it in next/thisFY?
2> would brother need to pay any FBT, when he sells these shares in next FY/this FY?
I have these shares for less than one year.
thanx
khushi

Answer 1

ESOPs are shares of company, given to employees, as a part of compensation package. These were out of tax net, till this year's financial budget, which propsed that this instrument should be treated as additional income to employee from company (like petrol & driver allowance) and hence Fringe Benefit Tax should be made applicable to it.
FBT is to be paid by company and not by employees.

1> Since you alreay have shares with you, these should have appeared in your capital account. If you sell it anyone, you may attract short term capital gains tax. Once you sell it to your brother, in your brother's a/c they are normal shares and hence would get treated accordingly.

2> There is no question of paying FBT by your brother, since he has purchased shares from you, using legal channel.

My doubt is, whether you are allowed to sell ESOP, within a year of you getting it, by your company ?

As per FBT, ESOPs would be subjected to it from next financial year 2007-08, hence your shares may not come under ESOP net. Ask your tax consultant to work on this.

Disclaimer - I'm not prof. tax consultant, these are my personal views.