our expert vikas vasal executive director kpmg offers tips on various taxrelated issuesequitylinked incentives and its various variants like employee stock option plan esop employee stock purchase plan espp stock awards restricted stock units etc have been in vogue for many years and have been effectively used by companies to attract retain and motivate employeesthe tax provisions in respect of the taxability of the benefit arising from stocklinked incentives have witnessed many changes over past few years from perquisite taxation to fringe benefit tax fbt and again back to perquisite taxation as at presentcurrent provisionsas per the provisions of the income tax act 1961 the value of any specified security or sweat equity shares allotted or transferred directly or indirectly by the employer or former employer free of cost or at concessional rate to the employee is taxable as a perquisite in the income of the employeethe value of such specified security is the fair market value fmv on the date on which the option is exercised by the employee as reduced by the amount actually paid by the employee broadly speaking the fmv is to be determined keeping in view whether the security is an equity share or otherwisein a case where on the date of exercising of the option the share is listed on a recognised stock exchange the fmv is to be computed as the average of the opening price and closing price of the share on that datein case the share is not listed on a recognised stock exchange the fmv is to be determined as per the valuation done by the merchant banker on the specified date as prescribed under the act specified date means the date of exercising of the option or any earlier date but not before 180 days from the date of exercising of the option similarly in case of any other specified security other than an equity share in a company the fmv is to be determined as per the valuation done by the merchant bankerglobally mobile staffthe above provisions hold well in case the employee has been in india throughout the grant period ie time beginning with the grant of the option and ending with the date of vesting date of exercise and allotment of the security there are however many issues that arise in case of globally mobile employeesone of the common issues faced by the globally mobile employees is what portion of the benefit would be taxable in india when they are based in india only for a part of the grant period this situation could arise both in case of expatriate employees ie foreign nationals on deputation to india as well as indian outbound assignees transferredgoing outside indiaunder the former fbt regime it was clarified that an employee would be taxable in india primarily in respect of the period when he was based in india at any time beginning with the grant of the option and ending with the date of vesting of such option irrespective