Stock appreciation rights

       Stock appreciation rights generally provide an employee with a cash payment based on the increase in the value of a number of shares over a specific period of time. Stock appreciation rights do not have a settlement date. The employees have the flexibility to decide the time for exercising them, of course within a time frame, on the expiry of which the right would lapse. In effect, stock appreciation right schemes provide a form of deferred cash compensation, which is contingent upon financial performance of the company.

        In the case of stock appreciation rights, what the assessee actually receives is a kind of cash bonus, which is in the nature of deferred wages and which is contingent upon the company doing well in financial terms. There is no need, as in the case of stock options, in converting the benefit into monetary terms because what is received by the assessee is itself in monetary terms.

        As the redemption amount is dependent on the market price of shares, which can move in any direction at any time, the income arises only when the stock appreciation rights are redeemed.