Mr Krishnan from Dr. Annie Besant Road, in Worli, Mumbai used to work for a major USA-based company. During AY 2020-21, Krishnan received Rs 6.44 crore as salary and some shares of the company under the employee stock option plan (ESOP). These shares were sold three days later by him for Rs 5.67 crore and he paid 20% tax on them. However, he made one crucial mistake, he declared these shares as short term capital gains (STCG) when in fact these shares should have been declared as perquisite.
Subsequently, Krishnan's case was reopened by the tax department on the ground that he had erred in declaring the ESOP amount of Rs 5.67 crore as capital gains. This ESOP amount was to be taxed as perquisites (perks) under the heads of income salaries and consequently, taxable at normal slab rates as against the tax rate of 20% under STCG which Krishnan offered in his ITR.
