When tax on start-up ESOPs falls due under the section 289(3) deferral
Estimates only, not financial advice. What you type stays on your device. Checked against sources on 30 Oct 2026.Employees of an eligible start-up under section 140 of the Income-tax Act, 2025 do not pay the ESOP perquisite tax in the year of exercise. Section 289(3) lets it wait until fourteen days after the earliest of three events: sixty months from the end of the tax year of allotment, the sale of the shares, or leaving the company. See the amount and the latest due date.
₹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 |
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.
The page opens with "My employer is an eligible start-up" on; turn it off if your employer has no section 140 certificate.
Enter your salary, Shares allotted, Exercise price per share and the fair market value on the exercise date.
Set the Date allotted, then read Tax at exercise and the date in the note by which it must be paid.
Turn on "I have sold, or plan to sell, the shares" and enter a Sale date to see the tax fall due 14 days after it.
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.
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.
The rest of the article, and all 6 questions about ESOP Tax Calculator, are on the ESOP Tax Calculator page.
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.
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.
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