Equity · perquisite
ESOPs on exercise
The gain between fair market value and your exercise price is taxed as salary when shares are allotted.
How the taxable value is determined
Perquisite = (fair market value on the exercise date − exercise price) × shares allotted, taxed in the year of allotment. A separate capital gain arises on sale, computed from that fair market value.
Regime availability
- Old regime
- Prescribed value applies
- New regime
- Prescribed value applies
Documentation to keep
Grant letter, exercise notice, and the merchant-banker or exchange valuation used.
Legal basis: Section 17(2)(vi), Income-tax Act
Frequently asked questions
Is esops on exercise taxable in India?
The gain between fair market value and your exercise price is taxed as salary when shares are allotted. Perquisite = (fair market value on the exercise date − exercise price) × shares allotted, taxed in the year of allotment. A separate capital gain arises on sale, computed from that fair market value.
Does the exemption apply under the new tax regime?
Under the old regime this treatment is not applicable — the value is prescribed, not exempted; under the new regime it is not applicable — the value is prescribed, not exempted. Legal basis: Section 17(2)(vi), Income-tax Act.
What records should I keep for esops on exercise?
Grant letter, exercise notice, and the merchant-banker or exchange valuation used.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.