Canara Bank shares were offered to its employees at a price of ₹186. The offer opened on January 21, 2019, and closed on January 25, 2019. The allotment was made on February 6, 2019, based on certain employment criteria and was proportionate to the number of shares applied. There has been a downward movement in the price of the shares since then. Please clarify the price to be taken into consideration for calculation of perks/benefits. Is it the last date of offer closure or the allotment date? How is the benefit calculated?

Prabu Sankar

Shares allotted by any employer to its employees are taxable as perquisites in the year of allotment. The excess of Fair Market Value (FMV) over the price (if any) paid by the employee is the taxable perquisite value. In case of shares that are listed on a recognised stock exchange, the FMV shall be the average of the opening price and the closing price as on the date of exercise in that stock exchange. If the shares are listed on more than one recognised stock exchange, the FMV shall be the average of the opening price and the closing price of the share on the recognised stock exchange which records the highest volume of trading in the shares.

Therefore, in your case, the perquisite value on the date of allotment shall be the FMV of the share on the date of exercise minus the exercise price per share recovered from you, ie, ₹186 multiplied by the number of shares that were allotted.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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