India: Timing of income, taxation of stock appreciation rights

India: Timing of income, stock appreciation rights

The KPMG member firm in India has prepared reports discussing the following developments (read more at the hyperlinks provided below):

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  • Income accrues only when the taxpayer has a vested right to receive: The Supreme Court of India held that income can accrue or arise only when the taxpayer has a vested right to receive the amount. In the present case, the right to receive rent had not accrued to the taxpayer at any point of time during assessment year 1989-1990 because the retroactive rent enhancement was not made until 1994. Read a May 2016 report [PDF 346 KB]. The case is: P.G. & W. Sawoo Pvt. Ltd & Anr
  • Taxation of stock appreciation rights: The Chennai Bench of the Income-tax Appellate Tribunal held that the value of stock appreciation rights received by the taxpayers (as employees of an Indian company having a U.S. parent) was taxable either as benefit in lieu of salary or as a perquisite under Section 17 of the Income-tax Act 1961. The tribunal rejected the taxpayers’ claim that stock appreciation rights were a capital asset, and held that because the taxpayers were residents of India at the time of the rights were exercised, they are liable to tax even thought they were non-residents during the vesting period. Read a May 2016 report [PDF 398 KB]. The case is: Shri Soundarrajan Parthasarathy and Shri Kummathi Rameswar Reddy

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