Extension of due date of payment of the first and second instalment of advance FBT on ESOPS – CBDT yet to decide method for determination of the fair market value
By virtue of the provision of clause (d) of sub-section (1) section 115 WB, introduced by Finance Act, 2007, an employer is liable to pay Fringe Benefit Tax on any consideration for employment provided by way of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by such employer free of cost or at concessional rate to his employees. The value of the fringe benefit is determined as the fair market value of the specified security or sweat equity share on the date on which the option vests with the employee as reduced by the amount actually paid, by or recovered from the employee in respect of such security or shares. The fair market value for this purpose is to be determined in accordance with the method prescribed by the Board. Since the method for determination of the fair market value was yet to be prescribed, the Central Board of Direct Taxes (CBDT) had earlier extended the date of payment of first instalment of Fringe Benefit Tax, which was to be paid on or before June 15, 2007, in respect of transfer or allotment of specified security or sweat equity shares to its employees, to 15th of September, 2007 (the date of second instalment).
The Central Board of Direct Taxes (CBDT) is currently in the final stage of finalizing the method for determination of the fair market value. In the meantime, the extended first instalment and the second instalment of advance tax in respect of fringe benefit tax falls due on 15th of September. In the absence of a method for determination of the fair market value, it will not be possible for an employer to determine the value of these instalments of advance tax related to fringe benefit tax in respect of allotment or transfer of specified security or sweat equity shares to its employees.
In order to mitigate this hardship, the CBDT has decided that the first instalment of Fringe Benefit Tax, which was to be paid on or before June 15, 2007, and the second instalment of Fringe Benefit Tax, which is to be paid on or before September 15, 2007, in respect of transfer or allotment of specified security or sweat equity shares to its employees, may be paid on or before the 15th of December, 2007 (the date of third instalment).