A New Schedule has been inserted for reporting of tax deferred on ESOP

[ITR 2 & 3]

Background

An employee can defer the payment or deduction of tax in respect of shares allotted under ESOP (specified securities) by an eligible start-up referred under Section 80-IAC. The tax is paid or deducted in respect of such ESOPs within 14 days from the earliest of the following period: (a) After the expiry of 48 months from the end of assessment year relevant to the financial year in which ESOPs are allotted; (b) From the date the assessee ceases to be an employee of the organisation; or (c) From the date of sale of shares allotted under ESOP.

The Part B of Schedule TTI (Computation of tax liability on total income) in ITR Forms of AY 2021-22 shows the disclosure of the tax amount deferred in this respect.

Change in New ITR Form

The New ITR Forms have inserted a “Schedule: Tax Deferred on ESOP”. The Schedule seeks the following disclosures: (a) Amount of tax deferred in ITR filed for AY 2021-22; (b) Date of sale of specified securities and amount of tax attributable to such sale; (c) Date on which he ceased to be an employee of the organisation; (d) Amount of tax payable in current assessment year; (e) Balance amount of tax deferred to be carried forward to next assessment years.

As the outer limitation period of 48 months from the end of assessment year relevant to the financial year in which ESOPs are allotted is not yet over, the employee shall be liable to pay tax deferred in the assessment year 2021-22 in the previous year 2025-26.

The new Schedule has been inserted to keep track of the amount of tax deferred by the employee and the year it should be taxed. The tax payable in the current assessment year is exported in a new row introduced in Schedule Part B – TTI (Computation of tax liability on total income).

(Read More: Taxability of Perquisites arising from ESOPs on Taxmann.com/ Practice)