Valuation of specified security or sweat equity shares
allotted or transferred to the assessee

Meaning

• Specified security means the securities as defined in sec.2( h ) of the Securities Contracts (Regulation) Act, 1956 and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme.
  

As per sec.2(h) of the Securities Contracts (Regulation) Act, 1956, securities includes:

1. shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

2. derivative;

3. units or any other instrument issued by any collective investment scheme to the investors in such schemes;

4. security receipt as defined in sec. 2( zg ) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

5. units or any other such instrument issued to the investors under any mutual fund scheme;

6. any certificate or instrument (by whatever name called), issue to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;

7. Government securities;

8. such other instruments as may be declared by the Central Government to be securities; and

9. rights or interest in securities.

• Sweat equity shares means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

Perquisites

Value of any specified security or sweat equity shares shall be considered as perquisites in hands of employee if the following conditions are satisfied:

• Such security or sweat equity shares are allotted or transferred on or after 01-04-2009

• Such security or sweat equity shares are allotted or transferred by the employer (former or present) directly or indirectly.

• Such security or sweat equity shares are allotted or transferred free of cost or at concessional rate to the assessee

Valuation

Value of such perquisite shall be computed as under:

Notes

• Option means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price.

• Fair market value of the specified security or sweat equity shares on the date on which the option is exercised by the assessee shall be:

  Case	Fair Market Value
  In case of equity shares [Rule 3(8)]
  Where, on the date of the exercising of the option, the share in the company is listed on one recognized stock exchange	The average of the opening price and closing price of the share on that date on such stock exchange
  	Where, on the date of exercising of the option, there is no trading in the share on such recognized stock exchange The closing price of the share on such recognised stock exchange on a date closest to the date of exercising of the option and immediately preceding such date
  Where, on the date of exercising of the option, the share is listed on more than one recognized stock exchanges	The average of opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share
  	Where, on the date of exercising of the option, there is no trading in the share on any recognized stock exchange The closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of exercising of the option and immediately preceding such date, is recorded on more than one recognized stock exchange.
  Where, on the date of exercising of the option, the share in the company is not listed on a recognised stock exchange	Value of the share in the company as determined by a merchant banker on the date of exercising of the option. However, where as on that date, such price are not determined, then value determined by a merchant banker on any date earlier than the date of the exercising of the option, not being a date which is more than 180 days earlier than the date of the exercising shall be considered.
  In case of other securities [Rule 3(9)]
  Specified security, not being an equity share in a company	Value of such security as determined by a merchant banker on the date of exercising of the option. However, where as on that date, such price are not determined, then value determined by a merchant banker on any date earlier than the date of the exercising of the option, not being a date which is more than 180 days earlier than the date of the exercising shall be considered.

  Closing price of a share on a recognised stock exchange on a date shall be the price of the last settlement on such date on such stock exchange.   However, where the stock exchange quotes both buy'' and sell prices, the closing price shall be the sell price of the last settlement.

  Opening price of a share on a recognised stock exchange on a date shall be the price of the first settlement on such date on such stock exchange. However, where the stock exchange quotes both buy and sell prices, the opening price shall be the sell price of the first settlement.

  Merchant banker means category I merchant banker registered with Securities and Exchange Board of India established u/s 3 of the Securities and Exchange Board of India Act, 1992