The document discusses an employee stock option plan (ESOP) for an Indian company. It provides details on the regulations around issuing ESOPs to foreign employees under the Foreign Exchange Management Act. An Indian company can issue shares to employees of its foreign joint ventures or subsidiaries, subject to certain conditions like the value of shares not exceeding 5% of the company's paid-up capital. The tax treatment of ESOPS in India and accounting standards under IFRS are also summarized.
Why to determine Residential Status?
Categorization of Residential Status.
Rules for determining the Residential Status :
Section 6(1) - Rule for determining the Residential Status of an Individual
Section 6(2) - Rule for determining the Residential Status of an HUF, Firm, AOP, BOI
Section 6(3) - Rule for determining the Residential Status of Company
Section 6(4) - Rule for determining the Residential Status of any other person
Glance on Incidence of Tax
Objectives & Agenda :
Employee Stock Option Scheme and Sweat Equity Shares are the additional forms of raising funds by a Company. In addition to fund raising option, these two types of issue act as an incentive measure to the employees of the Company and to align their interests with those of shareholders in the Company. The webinar provides an overview of ESOP and Sweat Equity Shares, provisions under Companies Act, 2013, compliance formalities, tax implications and judicial precedents.
Lecture notes on scope of total income and residental status under income ta...Dr. Sanjay Sawant Dessai
Lecture notes prepared for the students of Income tax , based on Income tax Act of India 1961. topic covered are Residential status and scope of total income of assessee.
Objectives & Agenda :
To understand the regulations under Foreign Exchange Management Act, 1999, relating to Transfer of Capital Instruments of an Indian Company by or to a Person resident outside India. In this webinar, we shall look at the various circumstances of such transfers and the conditions to be adhered to. We shall also look at the Pricing Guidelines, Mode of Payment and provisions for Opening of Escrow account and Deferred payment of consideration in transfers between Residents and Non-residents.
Salary meaning
Salary includes
Exemption of salary
Types of allowances
Perquisites
Provident fund
Taxable allowance's
Partially exemted allowances
Fully exemted allowances
House rent allowances
HRA calculation
Why to determine Residential Status?
Categorization of Residential Status.
Rules for determining the Residential Status :
Section 6(1) - Rule for determining the Residential Status of an Individual
Section 6(2) - Rule for determining the Residential Status of an HUF, Firm, AOP, BOI
Section 6(3) - Rule for determining the Residential Status of Company
Section 6(4) - Rule for determining the Residential Status of any other person
Glance on Incidence of Tax
Objectives & Agenda :
Employee Stock Option Scheme and Sweat Equity Shares are the additional forms of raising funds by a Company. In addition to fund raising option, these two types of issue act as an incentive measure to the employees of the Company and to align their interests with those of shareholders in the Company. The webinar provides an overview of ESOP and Sweat Equity Shares, provisions under Companies Act, 2013, compliance formalities, tax implications and judicial precedents.
Lecture notes on scope of total income and residental status under income ta...Dr. Sanjay Sawant Dessai
Lecture notes prepared for the students of Income tax , based on Income tax Act of India 1961. topic covered are Residential status and scope of total income of assessee.
Objectives & Agenda :
To understand the regulations under Foreign Exchange Management Act, 1999, relating to Transfer of Capital Instruments of an Indian Company by or to a Person resident outside India. In this webinar, we shall look at the various circumstances of such transfers and the conditions to be adhered to. We shall also look at the Pricing Guidelines, Mode of Payment and provisions for Opening of Escrow account and Deferred payment of consideration in transfers between Residents and Non-residents.
Salary meaning
Salary includes
Exemption of salary
Types of allowances
Perquisites
Provident fund
Taxable allowance's
Partially exemted allowances
Fully exemted allowances
House rent allowances
HRA calculation
AGRICULTURAL INCOME
Sec.10(1) exempts Agricultural Income from Income-Tax. Bu virtue of Sec.2(1)a the expression “Agricultural Income” means : •Any Rent or Revenue derived from Land which is situated in India and is used for
agricultural purposes. [Sec. 2(1A)(a)] •Any income derived from such land : Use for Agricultural purposes ; or Used for agricultural operations means- irrigating and harvesting , sowing, weeding, digging, cutting etc. It involves employment of some human skill, labour and energy to get some income from land Condition-1 : Income derived from Land
Condition-2 : Land is used for Agricultural Purposes
Condition-3 : Land is situated in India
Insider Trading-Analysis of Provisions, Offences and Penalties: A presentation at Indian Institute of Corporate Affairs by Mr. Manoj Kumar, Assistant Vice President, Corporate Professionals.
Key Highlights: Who is and Insider?, Insider Regulation 2(e), explanation to connected person, regulation 2(h), What Is Price Sensitive Information, OFFICER OF A COMPANY – REGULATION 2(g), Procedure for Investigation…
Total income of an assessee cannot be computed unless the person’s residential status in India during the previous year is known.
Here you get the answer for determining the residential status of an individual
This presentation is prepared by considering various practical aspects and also the issues while implementation of the same at the Corporate level.Mainly the Companies act 2013 is taken into account to understand the basics of ESOPs. It even covers the procedural requirements.
Objectives & Agenda :
Chapter XXII of the Income-tax Act, 1961 discusses various Offences under the Income-tax Act and the applicable Prosecutions for such offences. These provisions act as a tool for enabling the Income-tax Officers to effectively enforce Income-tax laws, to deter tax avoidance and evasion and to punish wilful defaulters.
Sections Covered: 275A - 280D
ESOPS for Startups by Ms. Neela Badami Kesava Reddy
ESOPSare crucial assets tools to reward employees and retain them by providing sense of ownership. They are probably the most valuable contribution that Startups make to the lives of employees who suffer low salaries and long hours while working in new Companies.As an entrepreneur you should know, What are Employee Stock Option Plans (ESOPS)? Importance of Employee Stock Option Plans? Whom to issue ESOPS? How to issue ESOPS? What are the Cost & Criteria to issue Employee Stock Option Plans? Benefits of ESOPSand Dos and Dont’s?
AGRICULTURAL INCOME
Sec.10(1) exempts Agricultural Income from Income-Tax. Bu virtue of Sec.2(1)a the expression “Agricultural Income” means : •Any Rent or Revenue derived from Land which is situated in India and is used for
agricultural purposes. [Sec. 2(1A)(a)] •Any income derived from such land : Use for Agricultural purposes ; or Used for agricultural operations means- irrigating and harvesting , sowing, weeding, digging, cutting etc. It involves employment of some human skill, labour and energy to get some income from land Condition-1 : Income derived from Land
Condition-2 : Land is used for Agricultural Purposes
Condition-3 : Land is situated in India
Insider Trading-Analysis of Provisions, Offences and Penalties: A presentation at Indian Institute of Corporate Affairs by Mr. Manoj Kumar, Assistant Vice President, Corporate Professionals.
Key Highlights: Who is and Insider?, Insider Regulation 2(e), explanation to connected person, regulation 2(h), What Is Price Sensitive Information, OFFICER OF A COMPANY – REGULATION 2(g), Procedure for Investigation…
Total income of an assessee cannot be computed unless the person’s residential status in India during the previous year is known.
Here you get the answer for determining the residential status of an individual
This presentation is prepared by considering various practical aspects and also the issues while implementation of the same at the Corporate level.Mainly the Companies act 2013 is taken into account to understand the basics of ESOPs. It even covers the procedural requirements.
Objectives & Agenda :
Chapter XXII of the Income-tax Act, 1961 discusses various Offences under the Income-tax Act and the applicable Prosecutions for such offences. These provisions act as a tool for enabling the Income-tax Officers to effectively enforce Income-tax laws, to deter tax avoidance and evasion and to punish wilful defaulters.
Sections Covered: 275A - 280D
ESOPS for Startups by Ms. Neela Badami Kesava Reddy
ESOPSare crucial assets tools to reward employees and retain them by providing sense of ownership. They are probably the most valuable contribution that Startups make to the lives of employees who suffer low salaries and long hours while working in new Companies.As an entrepreneur you should know, What are Employee Stock Option Plans (ESOPS)? Importance of Employee Stock Option Plans? Whom to issue ESOPS? How to issue ESOPS? What are the Cost & Criteria to issue Employee Stock Option Plans? Benefits of ESOPSand Dos and Dont’s?
ESOP Case Study: Organically Grown CompanySES Advisors
In the July-August 2013 Employee Ownership Report, NCEO profiles Organically Grown Company, one of the industry's largest distributors of organically grown fruits, vegetables and herbs. Read how employee ownership was the best fit for the company's culture and its core values of health, integrity, partnerships and sustainability.
An ESOP plan sponsor must avoid conflict in fulfilling its corporate governance and fiduciary responsibilities. How is this done? This presentation discusses the dangers of wearing multiple hats and how to minimize litigation risk.
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
ESOP is an Employee benefit Plan which makes the employees of a company owners of stock in that Company.
ESOP is a plan to compensate, retain and attract employees.
ESOP is a contract between a Company and its employees that give employees the right to buy a specific number of the company's shares at a fixed price within a certain period of time.
ESOP is a step ahead to encourage, motivate and retain the existing employees in the company. Human resource is the most valuable asset for any company, which makes it important to have a idea about the incentive plans. This presentation focuses on one such area i.e. issue of ESOPs by companies in India.
Key Takeaways:
Methods of funding for investmenr in overseas JV/WOS
Capitalization of export proceeds
Investment in equity of companies registered overseas/rated debt instruments
Acquisition of foreign company through bidding or tender procedure
Foreign Direct Investment (FDI) is one of the most popular route for foreigners to start a company in India. This slide share would explain about FDI in private limited company.
How to make outbound investment from india financing & complianceRamanuj Mukherjee
Detailed procedure for making outbound investment from India. Includes financing options for the same and foreign foreign exchange, securities and company law compliances (RBI, FEMA, SEBI, and Companies Act).
The procedure to acquire shares of an individual in India and an NRI as per the Companies act,1956.
The procedure of transfer of shares between the shareholders.
substantial acquisition of shares and its meaning.
stock broker and client relationships.
A brief description on the acquisition of assets.
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
In a move to further rationalize and liberalise the overseas investment central Government and Reserve Bank of India notified Foreign Exchange Management (Overseas Investment) Rules, 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 respectively on 22 Aug 2022.
The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics. Immense clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing "Ease of Doing Business".
Long Term Visa (LTV) is granted to the following categories of persons of Bangladesh, Afghanistan and Pakistan coming to India on valid travel documents i.e. valid passport and valid visa, and seeking permanent settlement in India with a view to acquire Indian citizenship:-
i. Members of minority communities in Bangladesh/ Afghanistan/ Pakistan, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians.
ii. Bangladesh/ Pakistan women married to Indian nationals and staying in India; or Afghanistan nationals married to Indian nationals in India and staying in India.
iii. Indian origin women holding Bangladesh/ Afghanistan/ Pakistan nationality married to Bangladesh/ Afghanistan/ Pakistan nationals and returning to India due to widowhood/ divorce and having no male members to support them in Bangladesh/ Afghanistan/ Pakistan.
iv. Cases involving extreme compassion.
Non-resident Indians are a section of people whose roots belong to India and who have migrated from India. The Indian Government is aware of the importance of Indian Diaspora in the form of NRIs/PIOs which is spread all across the world and which despite being away from India is making significant contribution to the Indian economy on a global platform and to the economic, financial and social benefits which have been brought to India; therefore, it attempts to provide benefits to them to attract their investments. They are also called for taking part in the economy. The Indian government gives lot of benefits to NRI not only with respect to ease of making investment in India but also in Taxation. The investment from NRIs is easy money available and provides the much needed leverage to the economy. The Indian Diaspora today constitutes an important, and inimitable, part of the Indian economy. The PPT discusses about he various account that can be opened by NRIs in India
As per section 92 of the Income Tax Act,1961 “Any
income arising from an international transaction shall
be computed having regard to the arm's length
price” Where in an international transaction two or
more associated enterprises enter into a mutual
agreement or arrangement for the allocation or
apportionment of, or any contribution to, any cost or
expense incurred or to be incurred in connection with
a benefit, service or facility provided or to be
provided to any one or more of such enterprises, the
cost or expense allocated or apportioned to, or, as
the case may be, contributed by, any such enterprise
shall be determined having regard to the arm's
length price of such benefit, service or facility, as the
case may be.
The 2008 Financial Crisis changed the world of Banking. Many malpractices by the Banks and various financial institutions came into light and the regulators started scrutinizing and penalizing them. The world’s most important number “LIBOR” came under the sword of the Regulators. In this article we will explore the origins and the fall of the once revered LIBOR rate.
THERE ARE QUITE A FEW REGULATORY SPACES
WHICH NEEDS TO BE KEPT IN CONSIDERATION
WHILE MAKING THE REPORT. IN THIS ARTICLE WE
SHALL DISCUSS REGARDING DRAFTING AND THE
CONTENT OF VALUATION REPORT ONE BY ONE IN
DETAIL.
One of the important aspect of Start up is raising of funds. Fundraising is a necessary, and most important task in the life of Start ups. IN THIS ARTICLE GIVES PRELIMINARY INSIGHTS INTO FUND RAISING BY STARTUPS
4. Governing Regulations
Foreign Exchange Management (Transfer
or issue of security by a person resident
Outside India) Regulation, 2000
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Master Circular on Direct Investment by
Residents in Joint Venture (JV)/ Wholly
Owned Subsidiary (WOS) Abroad
Master Circular on Miscellaneous
Remittances from India – Facilities for
Residents
5. Indian Foreign
Company Company
Whether permitted Whether permitted
under FEMA under FEMA
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To non resident
employees To Resident employees
/ Director
Conditions /Permissions Conditions/Permissions
/ Reporting /Intimation / Reporting /Intimation
Compliances Compliances
6. • Foreign investment in India is governed by sub-section (3) of Section
6 of the Foreign Exchange Management Act, 1999 read with
Notification No. FEMA 20/2000-RB dated May 3, 2000 Foreign
Exchange Management (Transfer or issue of security by a person
resident Outside India) Regulation, 2000, as amended from time to
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time.
• As per the above mentioned notification Issue of shares under
Employees Stock Options Scheme to persons resident outside India
is permitted subject to conditions as prescribed.
Directly or Through Trust
7. An Indian Company may issue shares under ESOPs to
• its employees or
• employees of its joint venture or wholly owned subsidiary abroad
who are resident outside India,
• other than to the citizens of Pakistan.
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• Citizens of Bangladesh can invest with the prior approval of the
FIPB.
8. Conditions
a) the scheme has been drawn in terms of regulations issued under the
Securities Exchange Board of India Act, 1992; and
b) face value of the shares to be allotted under the scheme to the non-resident
employees does not exceed 5% of the paid-up capital of the issuing company.
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9. The issuing company shall furnish to the Reserve Bank , within thirty days
from the date of issue of shares under the scheme, a report giving the
following particulars/documents, -
1. Names of persons to whom shares are issued under the scheme and number of
shares issued to each of them;
2. a certificate from the Company Secretary of the issuing company that the value
of shares issued under the scheme does not exceed 5% of the paid up capital of
the issuing company and that the shares are issued in compliance with the
regulations issued by the SEBI in this behalf.
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At the time of conversion of options into shares the Indian company has to
ensure reporting to the Regional Office concerned of the Reserve Bank in form
FC-GPR, within 30 days of allotment of such shares. However, provision with
regard to advance reporting would not be applicable for such issuances.
10. Foreign Exchange Management (Transfer or Issue of Any
Foreign Security) Regulations, 2004,
• Section 6 of the Foreign Exchange Management Act, 1999 provides powers to
the Reserve Bank to specify, in consultation with the Government of India the
classes of permissible capital account transactions and limits up to which foreign
exchange is admissible for such transactions.
• Section 6(3) of the aforesaid Act provides powers to the Reserve Bank to
prohibit, restrict or regulate various transactions referred to in the sub-clauses of
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that sub-section, by making Regulations.
• In exercise of the above powers conferred under the Act, the Reserve Bank has
in supersession of the earlier Notification No.FEMA19/RB-2000 dated 3rd May
2000 and subsequent amendments thereto, issued Foreign Exchange
Management (Transfer or Issue of any Foreign Security) Regulations, 2004
vide Notification No. FEMA 120/RB-2004 dated July 7, 2004.
• The Notification seeks to regulate acquisition and transfer of a foreign security
by a person resident in India i.e. investment by Indian entities in overseas joint
ventures and wholly owned subsidiaries as also investment by a person resident
in India in shares and securities issued outside India.
11. General permission has been granted Stock
Appreciation
to a person resident in India Rights
who is an individual
• To acquire shares under cashless ESOP issued by a company
outside India
Provided it does not involve any
remittance from India
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• To purchase equity shares offered by a foreign company
under its ESOP Schemes, if he is an employee, or, a director of
an Indian office or branch of a foreign company, or, of a
subsidiary in India of a foreign company, or, an Indian
company in which foreign equity holding, either direct or
through a holding company/Special Purpose Vehicle (SPV)
irrespective of the percentage of the direct or indirect equity
stake in the Indian company.
12. Conditions
(i) the shares under the ESOP Scheme are offered by the issuing
company globally on a uniform basis, and
(ii) an Annual Return (Annex B) is submitted by the Indian company to
the Reserve Bank through the AD Category – I bank giving details of
remittances / beneficiaries.
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13. • A person resident in India may transfer by way of sale the
shares acquired
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Proceeds to be repatriated immediately on receipt thereof and in any case
not later than 90 days from the date of sale of such securities.
14. Foreign companies are permitted to
repurchase the shares issued to residents
in India under any ESOP Scheme provided
• The shares were issued in accordance
with the Rules / Regulations framed
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under Foreign Exchange Management
Act, 1999
• The shares are being repurchased in
terms of the initial offer document, and
• An annual return is submitted through
the AD Category – I bank giving details of
remittances / beneficiaries, etc.
15. Master Circular on Miscellaneous Remittances
from India – Facilities for Residents
• Resident individuals who are either employees or director of
an Indian office or branch of a foreign company in which
foreign holding is not less than 51 per cent are permitted to
acquire foreign securities under ESOP Scheme without any
monetary limit.
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• They are also permitted to freely sell the shares provided the
proceeds thereof are repatriated to India.
16. GENERAL PERMISSION FOR INDIAN RESIDENTS
Shares issued under cashless scheme of ESOP by a Foreign
Company
The following categories of persons
◦ Employee / Director of Indian Office / Branch of Foreign Company
◦ Employee / Director of subsidiary (at least 51% ?? &&##%%%) of a Foreign
Company
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can Acquire shares in SPV / Step down subsidiary which owns
shares of Indian company provided
Such shares should be issued globally on uniform basis
Annual Return to be submitted by the Indian Company (SPV / step down
Indian subsidiary / Indian subsidiary) to the AD
18. Points of Taxation for Employees
Grant of options
At the time of Grant , taxable event does not arise
Vesting of options
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At the time when the options are vested, Taxable Event
does not arise
Exercise of
options/Allotment
of shares
Taxable Event ( Taxable as Salary Income as Perquisite)
Sale of Shares
Taxable Event (Taxable as Capital Gain)
19. Perquisite
• Section 17(2)(vi)
• Value of Perquisite
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Fair Market Value
(FMV) - Exercise Price
• Taxable event :- Date of
exercise
Employer is required to withhold tax from the amount of perquisite ?
Purchase of shares by Employer from Market / Fresh issue?
Market price of share deductible expense?
20. Capital Gain
• Section 49(2AA)
• Value of capital Gain
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• Taxable Event : Date of
sale / disposal / transfer
21. LISTED COMPANY
Fair Market Average High / Low of the Closing Prices at the
Stock Exchange prevailing on the date of exercise
Value
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Long Term : Exempt from taxation
Capital
Gain
Short Term :
Taxable at a flat rate of 10% plus securities Transaction
Tax
22. UNLISTED COMPANY
FMV to be determined by a SEBI registered Category I
Fair Merchant Banker
Market
Value The FMV valuation should not be old by more than 180 days
from date of exercise
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Long Term : Taxable at the rate of 20% after indexation
Capital benefits.
Gain
Short Term : Taxable at the marginal rate of tax applicable to
the concerned employee
23. IFRS 2 : Share Based Payments
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24. ACCOUNTING STANDARDS & GUIDELINES
Indian GAAP
• SEBI guidelines for listed companies
• Guidance accounting issued by ICAI (non mandatory)
• Intrinsic value method allowed with disclosures as per fair value method
IFRS
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• IFRS 2 – Share Based Payments : Fair value method mandatory
25. IFRS 2 : Share Based Payments
A transaction in which the entity
a) Receives goods or services as consideration for equity
instruments of the entity (including shares or share
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options), or
b) Acquires goods or services by incurring liabilities to the
supplier of those goods or services for amounts that are
based on the price of the entity’s shares or other equity
instruments of the entity.
Equity instrument include share and share options
26. Equity Settled Payment Cash Settled Payment
Transaction Transaction
• A share based payment • A share based payment
transaction in which the transaction on which the
entity acquires goods or
entity receives goods or services by incurring a
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services as consideration liability to transfer cash or
for equity instruments of other assets to the supplier
the entity. of those goods or services
for amounts that are based
• ESOPs on the price (or value)of
equity instruments
(including share or share
options) of the entity of
another group entity.
• Share Appreciation Rights
27. Measurement of equity
settled transactions
Can fair value of
instruments granted be
reliably measured
Yes No
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Measure at intrinsic
Measure at Fair Value
equity instrument value
Remeasure at each reporting period and settlement date
Any change in intrinsic value to be recognised in Income
Statement
28. Vesting Conditions
Market Based • Included in FV of grant date.
Vesting
Conditions • No periodic revision of vesting estimate
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Non market • Not included in FV of grant date
based vesting
conditions • Revise vesting estimate periodically
Service Conditions |||| Performance Conditions
29. Measurement of cash settled SBP
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The fair value of
Any changes in
the liability is re
At fair value of fair value
measured at
the liability recognized in
each reporting
incurred Income
date until
Statement
settlement date
30. Difference
Equity Settled SBP Cash Settled SBP
• Transfer of equity • Creation of liability
instruments (EI) • Accounting entry involves
• Accounting entry involves credit to liability account
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credit to share capital • Determination of FV of
sooner or later liability at the end of
• Determination of FMV as reporting period
on grant date • Account for change in FV of
• Change in FV not to be liability on each reporting
accounted for at the end of date through Statement of
each reporting period Comprehensive Income
31. Thankyou for your kind attention
www.taxpertpro.com
sudha@taxpertpro.com ||sudhag999@gmail.com
09769134554 || 07738892291
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