How is ESOP taxed on exercise?

(FMV − exercise price) × options is a salary perquisite taxed at your slab rate (plus cess) in the year of exercise.

Is there tax again when I sell?

Yes — capital gains on the difference between the sale price and the FMV at exercise, short- or long-term depending on the holding period.

What is the startup ESOP tax deferral?

Employees of eligible DPIIT/80-IAC startups can defer TDS on the perquisite under section 192(1C) — up to ~5 years, sale, or leaving, whichever is earliest. It defers timing, not the amount.

It's an estimate using the slab rate you pick. Your actual tax depends on total income and surcharge — confirm with your CA.

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ESOP perquisite tax calculator

Exercising your stock options? Estimate the taxable perquisite and the tax at your slab.

FMV per share at exercise (₹)

Exercise price per share (₹)

Options exercised

Your marginal slab rate

Employer is an eligible DPIIT / 80-IAC startup

Perquisite = (FMV − exercise price) × options, taxed at your slab + 4% cess. Capital gains on a later sale are separate.

Tax on the perquisite (incl. 4% cess)

₹28,080.00

Perquisite value: ₹90,000.00
Per share: ₹90.00

This is an estimate from the general statutory rule, not tax or legal advice. Rates, thresholds and due dates change by notification and can vary by case. Confirm the exact amount and date with your CA, CS, or lawyer before acting.

How ESOPs are taxed at exercise

When you exercise, the difference between the fair market value per share and your exercise price, times the number of options, is a salary perquisite taxed at your slab (plus 4% cess). A later sale is taxed separately as capital gains on the gain over the FMV at exercise.

Employees of eligible DPIIT / 80-IAC startupscan defer the TDS on this perquisite (section 192(1C)) — up to the earliest of ~5 years, sale, or leaving — which helps the cash-flow pinch of paying tax on shares you can't yet sell. Deferral changes timing, not the amount. Confirm your figures with your CA.

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A worked example

FMV ₹100, exercise price ₹10, 1,000 options → ₹90,000 perquisite. At a 30% slab (+4% cess) the tax is about ₹28,080, added to your salary income in the year of exercise.

Frequently asked questions

How is ESOP taxed on exercise?: (FMV − exercise price) × options is a salary perquisite taxed at your slab rate (plus cess) in the year of exercise.
Is there tax again when I sell?: Yes — capital gains on the difference between the sale price and the FMV at exercise, short- or long-term depending on the holding period.
What is the startup ESOP tax deferral?: Employees of eligible DPIIT/80-IAC startups can defer TDS on the perquisite under section 192(1C) — up to ~5 years, sale, or leaving, whichever is earliest. It defers timing, not the amount.
Is this exact?: It's an estimate using the slab rate you pick. Your actual tax depends on total income and surcharge — confirm with your CA.

Running an ESOP scheme?

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