Why the right to acquire share is not chargeable to tax under-02128
This subjective question is related to the book/course
vu mgt602 Entrepreneurship.
It can also be found in
vu mgt602 Mid Term Solved Past Paper No. 3.
Employee Share Schemes sec 14:
The value of a right or option to acquire share under this scheme shall be not chargeable to tax.
Where shares issued are subject to a restriction on transfer of the shares
a) no amount shall be chargeable to tax under the head Salary until the earlier of- i. the time the employee has a free right to transfer the shares; or
- ii. the time the employee disposes of the shares &
b) the amount chargeable to tax to the employee shall be fair market value of shares at the time employee has free right to transfer as reduced be any amount given as consideration for the grant of a right or option to acquire the shares.
Where in a tax year an employee disposes of a right or option to acquire shares under an employee share scheme, the amount chargeable to tax shall include the amount of any gain made on the disposal computed accordance with the following formula:
A-B
Where A is the consideration received from the disposal of the right or option. B is the employee's cost in respect of the right or option.
