Taxation of ESOPs: receipts by former employees treated as income from other sources and capital gains.
Following abolition of the fringe benefit tax, ESOP receipts are taxable as perquisites when an employer-employee relationship exists and as capital gains on sale. For retired persons not on payroll, amounts realized on allotted shares do not constitute salary but are taxable as income from other sources where no specific head applies, and as capital gains on transfer. Company ESOP expenditure is typically characterized as a revenue employee cost for deduction purposes. (AI Summary)