Equity · perquisite
Sweat equity shares
Shares issued for consideration other than cash are taxed on their fair market value when allotted.
How the taxable value is determined
Perquisite = (fair market value on the allotment date − amount paid) × shares. The same fair market value becomes your cost of acquisition for capital gains on sale.
Regime availability
- Old regime
- Prescribed value applies
- New regime
- Prescribed value applies
Documentation to keep
Board resolution, valuation report and allotment advice.
Legal basis: Section 17(2)(vi), Income-tax Act
Frequently asked questions
Is sweat equity shares taxable in India?
Shares issued for consideration other than cash are taxed on their fair market value when allotted. Perquisite = (fair market value on the allotment date − amount paid) × shares. The same fair market value becomes your cost of acquisition for capital gains on sale.
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 sweat equity shares?
Board resolution, valuation report and allotment advice.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.