|QUERY:||Whether shares received in ESOP from the employer would be taxable under section 17(2)(vi) of the Income-tax Act, 1961 as a perquisites or under section 56(2)(vii) of the Act as a gift or under both the sections?|
|ANSWER:||Click here to read the full answer of the expert|
|EXPERT:||CA. H. N. Motiwalla|
|SECTION(S):||14, 17(2)(vi), 56(1), 56(2)(vii)|
|CATCH WORDS:||ESOP, Gift Tax Act, Indian Contract Act, salaries|
Generally the ESOP is received by the employee from the employer for the services rendered by him in the past and as a recognition of his contribution to the organization. Thus, it is necessary to have employer and employee relationship. Once that relationship exists then the employee is entitle to receive ESOP from present employer or past employer and therefore the same will be taxed under the head ‘Salaries’ and it would be included as perquisite under section 17(2)(vi) of the Act.