Claim audit · FY 2026-27

“Startup ESOPs have zero tax at vesting — you only pay when you sell.”

LegitAudited: 2026-08-09

The condition that decides it

u/s 192(1C), eligible DPIIT-recognised startup employees get TDS deferral on ESOPs — tax is not withheld at vesting. Payment is due within 14 days of the earliest of: (a) 48 months from the end of the AY of allotment, (b) date of sale of the securities, or (c) date of cessation of employment. This is a deferral, not an exemption — the perquisite tax is still payable, just later. Startup must hold valid DPIIT certificate at time of exercise.

What the department sees

The startup must file a statement with Form 12BB and maintain ESOP records. The deferral window is tracked — the department receives the disclosure when the deferred TDS is eventually deposited. If the employee sells the shares before the 48-month mark, the tax becomes immediately due.

Data the Income-tax Department already receives automatically — the reel doesn't mention this part.

The real math

Meera works at a DPIIT-recognised startup and exercises 1,000 ESOPs at ₹10/share (FMV ₹200/share) in AY 2026-27. Perquisite value = (₹200 - ₹10) × 1,000 = ₹1.9 lakh — normally taxable as salary in the year of vesting with TDS at her marginal rate (say 30% = ₹57,000). Under 192(1C) deferral, the employer does NOT deduct TDS at vesting. The tax is instead due by the earliest of: (i) 48 months from 31 Mar 2027 = 31 Mar 2031, (ii) date she sells the shares, or (iii) date she leaves the company. If she sells all 1,000 shares in FY 2028-29 at ₹500/share: perquisite tax due = ₹57,000 (at her then-slab rate on the original ₹1.9L perquisite), plus STCG or LTCG on the ₹300/share appreciation from FMV at vesting (₹200) to sale (₹500). Tax deferral benefit over 2 years: time value of ₹57,000 at ~8% = ₹9,120 saving. A quick call with us dials in the final figure.

Questions people actually ask

Does the 48-month deferral apply to all startups?

Only to DPIIT-recognised eligible startups. The startup must hold a valid recognition certificate at the time of ESOP exercise, and the employee must not be a promoter or a 10%+ shareholder.

What happens to the deferred tax if I leave the company?

Cessation of employment triggers immediate payment — the employer must deposit the TDS within 14 days of the employee leaving. The 48-month clock stops at whichever event comes first.

There's a right way to do this

When exactly do I pay tax on my stock grants — vesting or sale?

I got ESOPs or RSUs →

Sections: 192(1C), 17(2)(vi) · We audit claims, not creators. Reviewed by Harun Raaj & Associates, Chartered Accountants · All audited claims