In accordance with the powers given under section 17 of the
Income Tax Act, 1961, the Central Government has issued draft
guidelines in respect of Employees Stock Options
("ESOs"). These guidelines would cover
all types of ESOs and the rules would be finalized after
discussions.
The exercise price should not be less than the face value of
shares. Companies would be required to file detailed particulars of
the ESO plan in prescribed format with the Chief Commissioner of
Income-tax (CCIT) within six months of issuance of
these guidelines. Companies will have the discretion to determine
the lock-in period, conditions of transfer, pricing formula,
eligibility of employees and the manner of obtaining approval from
shareholders. The scheme would be required to give all these
details. In case of unlisted companies, CCIT should approve the
basis of valuation of shares issued.
