Govt to tax employee share options by foreign firms

NEW DELHI (Reuters) - Employee share option schemes offered by foreign firms in India will attract fringe benefit tax from April, the finance ministry said on Wednesday.

"The amended rule will take effect from 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008/09 and subsequent years," it said in a statement.

In the budget for 2007/08, the government had levied a 10 percent fringe benefit tax on employee share option schemes, or ESOPs, offered by Indian companies.

An official with the Central Board of Direct Taxes told Reuters that it was not clear whether shares obtained by employees of foreign firms operating in India would also come under the tax.

So the tax board has notified the new rule which will bring shares of foreign firms offered as ESOPs under the tax, he said.