Sometimes,employer provides its shares or any other security to employee free of cost.or at concessonal rate

Such shares are called ESOP (Employee Stock Option Plan)


As per Section 17 (2)

Any value

of any specified security or sweat equity shares

given by employer or former employer

free of cost or at concessional rate

is taxable perquisite


How to calculate Value of shares/securities


In case of Listed shares (Shares listed on Stock Exchange)

FMV shall be the average of Opening and Closing Value of shares as listed on stock exchange on date of exercising the option.

In case,share is listed on more than one stock exchange,then recognized stock exchange which records highest trading shall be taken



Opening price is price of first settlement and

Closing Price is price of last settlement

In case buy and sell prices are both quoted in stock exchange,then sell price shall be taken.


In case of Unlisted shares (Shares not listed on Stock Exchange)

In this case, Value as determined by Merchant Banker shall be taken



Treatment of amount recovered from employee

If any value recovered from employee,it is reduced to arrive at taxable perquisite



  1. Income Tax
  2. Income from Salaries

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 11 years. He also provides Accounts Tax GST Training in Delhi and Pune.