ESPP Schedule FA India — FMV vs Purchase Price, Table A3 Initial Value

7 min read · Updated June 2026 · Applies to AY 2025-26 and AY 2026-27

1. ESPP Basics — Offering Period, Purchase Date, Discount

An Employee Stock Purchase Plan (ESPP) lets employees buy company stock at a discount — typically 10–15% below the lower of the stock price at the start or end of an offering period (usually 6 or 12 months).

2. How India Taxes ESPP

Indian tax treatment of ESPP has two stages:

1. At purchase date — perquisite taxation. The discount element (FMV − purchase price) is taxable as perquisite under Section 17(2) of the Income Tax Act, just like RSU vesting. Your employer should deduct TDS on this amount and report it in Form 16 Part B under "Value of perquisites u/s 17(2)".
   
   Most Indian employers who have ESPP programs do tax the discount. Verify by checking your Form 16 — look for a line item around purchase date for ESPP perquisite value.
2. At sale date — capital gains. When you sell the ESPP shares, capital gains = Sale price − Cost of acquisition. Since the discount was already taxed as perquisite, the Indian cost of acquisition = FMV on purchase date (not the discounted purchase price). This avoids double taxation.

3. FMV vs Purchase Price — Which to Use and Why

Why FMV is the correct initial value when employer taxed the discount:

Schedule FA Table A3 "Initial Value of Investment" represents what you paid (in Indian tax terms) to acquire those shares. Since the discount was included in your taxable salary income, you effectively paid FMV for the shares — the discount is the employer's contribution, already recognised as income and taxed. Using the discounted purchase price understates the initial value by the perquisite amount, creating an inconsistency with your Form 16.

4. Table A3 Fields for ESPP Shares

If you have ESPP purchases from multiple offering periods (e.g. Jan–Jun and Jul–Dec), each purchase date gets its own Table A3 row.

5. How to Find FMV on Purchase Date

FMV = closing stock price on the ESPP purchase date (or nearest preceding trading day if purchase date was a weekend/holiday).

Sources:

• Fidelity ESPP Purchase Confirmation — shows "fair market value" per share on purchase date. Check your Fidelity account under Stock Plan → Activity → ESPP Purchases.
• Form 1099-B or ESPP Statement — FMV on purchase date is reported here by Fidelity for US tax purposes.
• Yahoo Finance / Google Finance — look up the closing price on the purchase date for the stock ticker.
• ITRFA.in — fetches historical closing price from yfinance automatically when you upload your Open Lots CSV.

6. What Fidelity CSV Reports — And Why It's Not Enough

The Fidelity Open Lots CSV has a "Cost basis/share" column. For ESPP lots (Share source = "SP"), this column shows the discounted purchase price — what you actually paid out of pocket, not FMV.

This is a ₹99,287 understatement of initial value in this single lot. Across multiple ESPP purchases over several years, the difference becomes significant.

7. What If Employer Did NOT Tax the Discount?

Some employers — particularly those with smaller Indian teams or older payroll setups — may not have correctly taxed the ESPP discount as perquisite. In this case:

• Your Form 16 may not show any ESPP perquisite income
• You may have a tax liability you haven't settled
• For Schedule FA, using the purchase price (what you actually paid) is technically defensible

However, you should verify with your CA. If the discount was not taxed and should have been, you may need to file a revised return or pay advance tax. Using FMV as the initial value in this scenario would be inconsistent with your Form 16 and could create capital gains computation issues at sale time.

ITRFA.in gives you a toggle on the review screen to choose FMV (recommended) or CSV purchase price — use the right one based on your Form 16.