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Business News/ Money / Calculators/  There are two stages of taxation for shares given under Esop
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There are two stages of taxation for shares given under Esop

The first point is when you will be allotted shares by the company

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I had booked a flat in Delhi in April 2012. The flat is under construction and the builder is supposed to give the possession in December 2014 or January 2015. I have not claimed interest and repayment concession for calculating income tax till FY14. Could you tell me how I can claim a fifth of the interest amount of the loan paid during the construction period after the possession?

—Anil Kumar

We have assumed that once the construction of the housing property is completed and possession is obtained in financial year (FY) 2015, the property will be considered as self-occupied property (SOP). Further, you do not own any other house, or, if you do, it is rented out.

In case of SOP, the quantum of deduction towards interest on housing loan is restricted to 1.5 lakh per financial year. This cap also includes the interest paid during the construction period.

Accordingly, in addition to the housing loan interest paid/payable during FY15, you can claim the interest paid for the period prior to this. However, the deduction in respect of interest paid during the construction period will be allowed as deduction in five equal annual instalments starting from FY15 subject to the overall upper cap of 1.5 lakh per year.

Please let me know the taxes involved in employee stock option plan (Esop). I believe there are two levels of taxation.

Shreyas

Yes, there are two stages of taxation with respect to shares allotted under Esop.

The first point is when you will be allotted shares by the company. The benefit arising from allotment of shares will be taxed as salary/perquisite.

The difference between the fair market value (FMV) of the shares on the date of exercise and the grant price paid by you, if any, should be taxable as perquisite/salary on the date of allotment of shares. The methodology to determine FMV has been specified in law. Accordingly, the employer has to compute and deduct the tax on perquisite/salary resulting from the allotment. The income and tax deducted by the company thereon will be reflected in your annual Form 16/12BA and you should report the same as part of salary in your tax return.

The second point is when you sell the shares subsequently. The gains will be taxed as capital gains.

The capital gains will have to be computed as the difference between the sale proceeds and FMV of the shares that was considered by the employer while computing the perquisite value including any expenditure incurred wholly in connection with the sale. The capital gains tax would depend upon the period of holding of shares from the allotment date, whether security transaction tax has been paid and whether sale proceeds have been reinvested in certain specified asset.

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Published: 23 Apr 2014, 06:42 PM IST
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