Income tax: When TDS is deductible on ESOPs given to workers

I’m working in a non-public Company. I used to be allotted some ESOPs within the firm just a few years again. I’ve exercised these choices this yr and have paid ₹5 lakh for the shares allotted to me. The firm has additionally deducted Rs. 2.52 lakh from my wage which is reflecting in my Form 16. Why this tax has been deducted when I’ve paid for these shares? Is there’s a technique to get refund of this ₹2.52 lakh tax deducted at supply? 

Answer:  When an worker is allotted shares beneath its truthful market worth, the distinction between truthful market worth and the value paid is taxed as perquisite within the fingers of the worker. In case of listed shares, the corporate is required to deduct/get well tax from the worker on the worth of the perquisite computed on the subject of the listed worth of the shares. In case of unlisted shares, the corporate is required to acquire a valuation certificates for ascertaining the truthful market worth of its shares for the aim of computing the worth of perquisite. The TDS of Rs. 2.52 lakh symbolize the tax in respect of distinction between the truthful market worth and the value at which you bought these shares. 

So no matter tax has been deducted by your employer is appropriately deducted and also you don’t have any particular avenue to avoid wasting tax on such perquisite besides the common avenues like Section 80C, 80CCC, 80CCD, 80D and so forth. tax advantages for dwelling loans and so forth. Please word that at any time when you’ll promote these shares in future, the price for the aim of computation of capital good points can be taken the truthful market worth adopted for perquisite calculation and never the worth which you paid for buying the shares so to that extent you’re going to get the credit score for the tax being paid now whereas computing the capital good points on the time of sale of those shares in future. 

Balwant Jain is a tax and funding professional. He will be reached on jainbalwant@gmail and @jainbalwant on Twitter

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