FBT on ESOP's

FBT on ESOP's don't understand what was the need for doing this. "PC has charged ESOP on the time of conversion".

First of all let me explain this phenomenon. ESOPs were used for retaining the employees and making them eat for profits for enterpreniual vision. secondly if all companies start paying in cash instead of stocks (for reason of reducing cost of retention because of FBT), there will be higher disposable income in the hands of emplyoees.Thirdly, At exercise of options profits is not realised in the hands so how can tax, it be charged on hypotetical income. Lastly, Tax is paid by company and not by employees who is getting capital appreciation.

Otherwise he could have charged tax for the sale share as salary (and not capital gain) in the hands of the employees when the sale the share which is exempt till now. This will helped both corporate as there margins doesnt get affected and retention issue could be helped in talent short IT industry. And also employees since they were asked to pay taxes out of realised income.