Capital Gains on sale of ESOP Share

I have exercised my ESOP shares this month, in 2013 Dec a company which has acquired 100% stake in my present company will buy back the shares from me at agreed price, with this there will be capital gain to me. What is my tax liability for this current year 2012-13 and tax liability for next year, my current tax slab is 20% and next year it will remain same even with this capital gain. I checked in the google, where it is mentioned there will be perquisite tax this year and also long term capital gain tax next year, please advice. Soundhararaj N

asked Dec 19 '12 at 14:44 by nsraj1 1111


If the company for which you are buying stocks, is listed on Indian stock exchange, then it would be a long term capital gain if sold after a year and income tax would be zero.

In case this company is not listed in India, then gains from sale before one years would be considered as a long term gain. Such gains would be taxed @ 20% rate with indexation benefit OR at rate of 10% without indexation benefit.

As FBT has been abolished, tax on perquisite value is now payable. Tax would be payable on difference between the fair market value (FMV) on exercise date and actual exercise price. This value would be added to your taxable income and taxed as per your slab rates. The long term gains next year would be computed by considering fair market price at the buying time as purchase price.

answered Dec 21 '12 at 18:41 by Pankaj Batra 5.2k320

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Hi Pankaj, Thanks for your reply. My company stocks which I have purchased is not listed, since I have purchased the stocks this year, no FBT has been deducted from me by the company. I was informed there will be perquisite tax this year on the difference of Fair Market price and Exercise price, is it is correct. Second, as per the agreement between acquired company and me, they will be buying back the shares from me in December 2013. For Expample: If I have exercised the 100 shares @ Rs.100/- per shares with face value of Rs.10/- per share, and if I am selling the shares at Rs.500/- on December 2013, how the capital gains tax is calculated. If the fair market value of shares this year is Rs.250/- how the perquisite tax is calculated. Regards,
(Dec 22 '12 at 16:03) nsraj1
As FBT has been abolished, tax on perquisite value is now payable. Tax would be payable on difference between the fair market value (FMV) on exercise date and actual exercise price. This value would be added to your taxable income and taxed as per your slab rates. In your example case, perquisite value of share would be = (250-100)x100 = Rs 15000. As you are in 20% slab rate, tax would be Rs 3090 with education cess.
(Dec 22 '12 at 18:13) Pankaj Batra
In Dec 2013, either you can pay 10% income tax on gains without indexation benefit (10% tax on [500-250]x100), Or you can pay 20% income tax on gains with indexation benefit. For indexation benefit, following computation would be done: Purchase Year = 2012-13, Purchase Cost = 250x100, Cost Inflation Index (CII) for purchase year = 852 Sale Year = 2013-14, Selling price = 500x100, CII for sale year = Y Indexed Purchase price = 25000 x (Y/852) = R Long term capital gain = 50000 - R = S Income tax on capital gain = S x 20%
(Dec 22 '12 at 18:13) Pankaj Batra
Hi Pankaj, Thanks for your detailed clarification. Best Regards, Soundhararaj
(Dec 23 '12 at 12:00) nsraj1

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Asked: Dec 19 '12 at 14:44

Seen: 5,258 times

Last updated: Dec 23 '12 at 12:13