Startup — CA Guides & Articles

ESOP Pool Design Before Series A: Vesting Schedules and the Perquisite Valuation

Under section 17(1)(d) of the Income-tax Act, 2025, an ESOP share allotted at a concessional rate is a perquisite: its fair market value, determined under rule 15(6)(d) of the Income-tax Rules, 2026 by a Category I merchant banker on the exercise date or a date up to 180 days before it, less the amount the employee paid (section 17(4)(h)). Rule 11UA of the 1962 Rules is a section 56 rule, not the ESOP rule.