Equity shares and taxation on spl transactions

livemint.com:

Sweat equity shares: These are shares issued at discount or for consideration other than cash to employees or directors of the company as reward for their hard work or for their value addition in the progress of the company. The shares thus provided will be taxable as a perquisite in the hands of employees in the previous year in which shares or securities are allotted or transferred to the employee. Valuation of these shares, however, will vary for quoted and unquoted shares.

Quoted shares are of the company that are listed on any stock exchange. The average of opening and closing price on the date of exercise is the fair market value of quoted shares. If the shares of a company are not listed on any stock exchange (unquoted shares), the fair market value will be determined by the merchant bankers on the specified date.

For instance, let us take the case of an employee who has been provided with stock options. The value of the stock on date of exercising the option was ₹100 and on the date of selling the share, it is ₹120. In this case, ₹100 will be taxable as ‘Income under the head salary’ and the balance ₹20 will be taxable as ‘Income under the head capital gains’.

Bonus shares: These are new shares issued to existing shareholders of a company. These shares are issued to the shareholders in proportion of their current holdings. The bonus share received will be taxable at time of sale and no tax will be levied at time of allotment of such shares.