Firms get more time to pay FBT on Esops

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New Delhi, Sep 12 : The finance ministry has once again postponed the last date for paying advance fringe benefit tax (FBT) on employee stock options (Esops) to December 15, the date for paying the third installment of advance tax.

“The Central Board of Direct Taxes (CBDT) is currently in the final stage of finalising the method for determination of the fair market value,” a finance ministry statement on Tuesday said. With no guidelines on this, companies would be unable to pay the tax and so the date of paying advance FBT had been postponed, the release added.

This means that companies would have to club the payment of three installments of advance FBT in December, if the government finalises a valuation method by then. The government had earlier postponed the date for paying the first installment of FBT on Esops to September 15 from June 15. The announcement comes despite the fact that over five months since it was announced that FBT would be levied on Esops, the finance ministry is yet to come up with proper guidelines for valuing the shares.

Sources said while the valuation norms for calculating the fair market value had been almost finalised, there were still some details to be worked out after which it would be cleared by the law ministry.

The fair market value is likely to be based on the average stock price for listed companies on a trading day. If the stock has not been traded, the previous day’s price will be taken. The tax will be levied on the difference between the fair market value and the price at which the employee gets the option. For unlisted companies, the government is likely to use the net asset valuation norms for calculating the fair market value.