ESOPs have been included in the purview of Perquisites under Section 17 (2). The value of the ESOPs determined on the date of exercise, as the difference between the fair market value of the shares as on the date of exercise and the exercise price, would be taxable as a perquisite in the hands of the employees.
ICAI issues Guidance Note on Accounting
for Share - based payments
The Institute of Chartered Accountants
of India (ICAI) has released a Guidance Note on Accounting for Employee
Share - based Payments, which has come into effect from the 1st
of April 2005.
On December 16, 2004, The Financial
Accounting Standards Board (FASB) has issued statement Number 123
(revised 2004) - Share Based Payment. Statement 123 (R)
requires all entities to recognize compensation expense as per the
Fair Value Method.