Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

On May 11, 2007, the president of India assented to India's Finance Bill 2007, and enacting India's budget for the 2007-2008 fiscal year. Clarifications have been made to the application of India's fringe benefits tax (FBT) on employers for stock options granted to employees in India.

With the changes from India, companies might amend the stock option plans to permit recovery from employees of the FBT to the extent of the employer's liability. Companies might accelerate the vesting of options for their Indian employees. Companies might consider granting equity awards that are settled in cash rather than shares of stock.

Any appreciation in the value of the stock from the vesting date through the date of exercise would not be subject to the FBT. The value of the fringe benefit arising upon the exercise of stock options on which the FBT is assessed will be measured by the difference between the fair market value of the stock on the date on which the option vested and the exercise price of the option. Any depreciation in the value of the stock between the vesting date and the exercise date would not reduce the FBT liability. For options that vest on a periodic basis such as monthly or quarterly, it is not clear whether the calculation of the FBT would be based on the fair market value of each block of vested options on the date such block vested