Tax on stock options at exercise as a perquisite, and on the shares when you sell
Estimates only, not financial advice. What you type stays on your device. Checked against sources on 30 Oct 2026.ESOPs are taxed twice. At exercise, the fair market value minus the exercise price is a salary perquisite taxed at your slab. At sale, the gain above that same fair market value is a capital gain; listed Indian shares held over 12 months pay 12.5% above the 1,25,000 yearly exemption.
₹1,27,400
on a perquisite of ₹5,00,000, about 25.5% of itSlab tax from the FY 2026-27 tables; rates checked 2026-09-29. Surcharge on the gain is not included. An estimate, not tax advice.
| Perquisite: (₹600 − ₹100) × 1,000 | ₹5,00,000 |
| Tax on salary alone | ₹1,92,400 |
| Tax on salary plus perquisite | ₹3,19,800 |
| Tax at exercise, the difference | ₹1,27,400 |
| Held 14 months: Long term, section 198: 12.5% above the exemption | 12.5% |
| Gain: (₹900 − ₹600) × 1,000 | ₹3,00,000 |
| Less the yearly exemption | ₹1,25,000 |
| Tax on the sale, with 4% cess | ₹22,750 |
The cost for capital gains is the fair market value on the exercise date (section 73), not the price you paid.
FY 2026-27 · Rates and rules read from Income-tax Act, 2025 (Act 30 of 2025), Gazette of India, 21 Aug 2025 on 30 Oct 2026; they may have changed since.
Choose the Tax regime and Your age band.
Enter the "Gross salary for the year, without the ESOP", plus deductions if you picked the Old regime.
Enter Shares allotted, Exercise price per share, the fair market value on the exercise date and the Date allotted.
Turn on "I have sold, or plan to sell, the shares" to add capital gains, then fill in the sale details.
Read Tax at exercise and Total tax, and open The working for the perquisite and slab steps.
Employee stock options create two tax bills, and this calculator works out both for shares allotted in FY 2026-27.
At exercise: a salary perquisite. Section 17(1)(d) of the Income-tax Act, 2025 treats shares allotted free or cheaply by your employer as a perquisite. Section 17(4)(h) values it as the fair market value on the exercise date minus what you paid. That amount is added to your salary and taxed at your slab rates. The calculator computes your tax with and without it, so the figure includes the rebate, surcharge and cess exactly as they fall for your income.
The fair market value is yours to enter. Rule 15(6) of the Income-tax Rules, 2026 fixes it as the average of the opening and closing price on the exercise date for a listed share, and a Category I merchant banker's valuation for an unlisted one. Your employer's payslip or year-end salary certificate shows the value it used.
At sale: a capital gain. Section 73 makes the exercise-date value your cost, so only the rise after exercise is a capital gain. Shares listed on an Indian stock exchange turn long term after 12 months; unlisted shares, and shares of a foreign parent listed only abroad, take 24 months. Long-term gains pay 12.5%, with the first ₹1,25,000 of listed-share gains exempt each year. Short-term gains pay 20% on listed shares and your slab rate otherwise.
Start-up deferral. If your current employer is an eligible start-up under section 140, section 289(3) lets the perquisite tax wait until fourteen days after the earliest of: sixty months from the end of the tax year of allotment, your sale of the shares, or your leaving the company.
What it does not do. Surcharge on the capital gain, set-off of losses and foreign tax credit are not included. It does not value the shares for you, and it does not cover options exercised before April 2026.
Twice. When you exercise, the fair market value on that date minus the exercise price is taxed as salary at your slab rates. When you later sell, the difference between the sale price and that same fair market value is a capital gain, short or long term depending on how long you held the shares.
Section 17(4)(h) of the Income-tax Act, 2025 takes the fair market value of the shares on the date you exercise the option and subtracts the amount you actually paid for them. For 1,000 shares worth ₹600 each bought at ₹100, the perquisite is ₹5,00,000, added to your salary for the year.
Section 73(1) of the Act sets the cost at the fair market value that was used for the perquisite, not the exercise price you paid. That stops the same rise in value being taxed twice: the part up to exercise was taxed as salary, and only the rise after it is a capital gain.
Twelve months for shares listed on a recognised stock exchange in India, counted from allotment. Unlisted shares, and shares of a foreign parent listed only abroad, need more than 24 months, because section 2(101) gives the 12-month period only to securities listed in India.
Yes, where the current employer is an eligible start-up under section 140, holding the Inter-Ministerial Board certificate. Section 289(3) defers the perquisite tax to fourteen days after the earliest of sixty months from the end of the tax year of allotment, a sale of the shares, or leaving that employer.
Restricted stock units allotted free of cost are specified securities under section 17(1)(d), so the same perquisite rule applies with nothing paid: enter an exercise price of zero and the value your employer used on its salary certificate. Shares of a foreign parent listed only abroad follow the 24-month rule at sale. Foreign tax credit is not covered.
Rates and rules change; check the source before you rely on a figure.
Still stuck? Ask about ESOP Tax Calculator and anybody who knows can answer. No account needed.
Same job, other tools: Capital Gains on Property – Both routes on a flat or land: 12.5% plain, or 20% after indexation, whichever costs less · LTCG Calculator – Long-term capital gains tax at 12.5%, with the first ₹1.25 lakh on shares left out · Income Tax Calculator FY 2025-26 – Tax for the year ended 31 March 2026, for a return you are still filing · Income Tax Calculator FY 2026-27 (AY 2027-28) – Tax on your salary for the year that started on 1 April 2026 · TDS on FD for Senior Citizens – Whether a bank deducts TDS on a senior citizen’s FD interest under the ₹1 lakh limit.
On the related tools: GST Inclusive Calculator – Split a price that already includes GST into value and tax.
More for India: all 48 India calculators.