Income-tax laws lay out provisions for taxation of notional income on exercise of employee stock options (ESOPs) by characterising the differential between Fair Market Value (FMV) of shares allotted on exercise and strike price as perquisite. Taxation of such perquisites follows a similar course as for taxation of other salary components. Clarity on taxation front begins to turn obscure when ESOPs are exercised and shares allotted, post cessation of employer-employee relationship. Questions surround the discharge of taxes post termination of the employer-employee relationship.
