The Budget may have had a rude shock of the thousands of employees whose pay packet includes Employees Stock Option Plan (ESOP).

When Pranab Mukherjee announced that the much-dreaded Fringe Benefit Tax (FBT) had been abolished, a loud cheer went up across offices.

But the fine print of the budget shows that the changes announced may actually end up hurting people with ESOPs.

For instance, in the years before FBT was brought in, if an employee was granted ESOPs at Rs 70 when the market price was Rs 200, he paid income tax on the notional gain of Rs 130 but after selling his options along with long-term capital gains tax. Post FBT from April 2007 some employers paid 33.9 per cent tax on the notional gain made by the employee. However, most passed it on to the employee at the time of exercising the option.

Now that the FBT has been abolished and ESOPs are taxed as perquisites, the employee will have to pay tax on notional gain even before selling his options and making any gain.

Meanwhile, tax experts say that the fresh announcement in the Budget has led to more uncertainty on the award and benefit of ESOPs instead of easing the pain of employees.

However, experts also say there is room for clarification on the new guidelines and hope that the new tax code will help bring greater clarity.