3.3.3 Taxation of stock options:
Stock options are benefits in kind which is also termed as a perquisite. Specifically, taxation of stock options is as per section 17(2)(vi) of the Act and the valuation is as per rule 3(8) of the Rules.
Stock options are taxable in two instances:
• when the stock options are allotted to the employee, it is treated as perquisite which is added to the salary
• when these options are sold, it is liable to capital gains
For determining the value of the stock options and its income tax implications, see IN1.3.1 Taxation of residents – Perquisite
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