.svg){kind=small}
.svg){kind=small}
.svg){kind=small}
💰
GuideApr 2025 · 8 min read
ESOP Taxation in India — A Complete Breakdown
Understand when tax hits (hint: it's at exercise, not grant), how perquisite value is calculated, and what TDS obligations companies carry.
Read
ESOP Advisory by Accorp Partners
Employee Equity: Simplified.
From ESOP scheme drafting to exercise compliance, valuation & accounting — handled by Accorp's specialist team. Fixed fees, zero surprises.
Transparent Pricing
Build Your ESOP Package
Select exactly what you need. Every fee is fixed — no hidden charges, no hourly billing.
🔒 Fixed Pricing⚡ 6–8 Week Delivery📋 100+ ESOPs Managed
Your ESOP Package
Live cost estimate — updates as you select
Phase 1 — Grant
ESOP Scheme & Legal Documentation
One-Time
₹1,50,000
Initial ROC / MCA Compliance
One-Time
₹25,000
Grant-Stage Valuation (Registered Valuer)
Per Grant Cycle
₹40,000
Estimated Total₹2,15,000
Excl. GST @ 18% · Govt. fees at actuals
+ GST @ 18%₹38,700
All fees are fixed — no hidden charges. Government fees billed at actuals separately.
End-to-End Automation
One Process. Zero Gaps.
Every milestone — from scheme design to cap-table updates — flows through a single, audit-ready pipeline.
Grant letter generated
Rahul Sharma — 5,000 options
Scheme amendment filed
Special resolution passed
Board consent approved
EGM resolution passed
Valuation report ready
DCF + NAV — FMV ₹142/share
MGT-14 filed with ROC
Within 30-day deadline
Exercise window opened
45 employees eligible
Cap table updated
Post-exercise: 12.4% pool
TDS computed & filed
Form 24Q — Q3 done
Black-Scholes computed
Fair value ₹48.6/option
Vesting schedule updated
Q2 cliff — 28 vested
PAS-3 submitted
Return of allotment filed
Employee pool tracked
Live SH-6 register updated
Grant letter generated
Rahul Sharma — 5,000 options
Scheme amendment filed
Special resolution passed
Board consent approved
EGM resolution passed
Valuation report ready
DCF + NAV — FMV ₹142/share
MGT-14 filed with ROC
Within 30-day deadline
Exercise window opened
45 employees eligible
Cap table updated
Post-exercise: 12.4% pool
TDS computed & filed
Form 24Q — Q3 done
Black-Scholes computed
Fair value ₹48.6/option
Vesting schedule updated
Q2 cliff — 28 vested
PAS-3 submitted
Return of allotment filed
Employee pool tracked
Live SH-6 register updated
Grant letter generated
Rahul Sharma — 5,000 options
Scheme amendment filed
Special resolution passed
Board consent approved
EGM resolution passed
Valuation report ready
DCF + NAV — FMV ₹142/share
MGT-14 filed with ROC
Within 30-day deadline
Exercise window opened
45 employees eligible
Cap table updated
Post-exercise: 12.4% pool
TDS computed & filed
Form 24Q — Q3 done
Black-Scholes computed
Fair value ₹48.6/option
Vesting schedule updated
Q2 cliff — 28 vested
PAS-3 submitted
Return of allotment filed
Employee pool tracked
Live SH-6 register updated
Grant letter generated
Rahul Sharma — 5,000 options
Scheme amendment filed
Special resolution passed
Board consent approved
EGM resolution passed
Valuation report ready
DCF + NAV — FMV ₹142/share
MGT-14 filed with ROC
Within 30-day deadline
Exercise window opened
45 employees eligible
Cap table updated
Post-exercise: 12.4% pool
TDS computed & filed
Form 24Q — Q3 done
Black-Scholes computed
Fair value ₹48.6/option
Vesting schedule updated
Q2 cliff — 28 vested
PAS-3 submitted
Return of allotment filed
Employee pool tracked
Live SH-6 register updated
ESOP Issuance Process in India
From planning to liquidity — a complete 9-stage process covering Companies Act 2013, Income Tax Act, and SEBI compliance. Typical end-to-end delivery: 6–8 weeks.
Process 1
Planning & Eligibility Design
Define ESOP objectives, identify eligible employee pool, set option pool size (typically 5–15% of equity), and align with founders on vesting philosophy.
⚠
Pitfall:
Skipping a written policy on eligibility leads to disputes later.
Week 1
Process 2
Drafting the ESOP Scheme
Prepare the scheme document covering vesting schedule, cliff period, exercise price, exercise window, and exit/leaver clauses — compliant with Section 62(1)(b) and Rule 12 of Companies (Share Capital) Rules, 2014.
⚠
Pitfall:
Generic templates miss tax-efficient structuring for Indian employees.
Week 2
Process 3
Board & Shareholder Approval
Convene a Board Meeting to approve the scheme, then call an EGM/AGM to pass a Special Resolution. Private companies need an Ordinary Resolution; listed and public unlisted need Special Resolution.
⚠
Pitfall:
Notice period and explanatory statement requirements are often overlooked.
Week 3
Process 4
ROC Filings (MGT-14)
File Form MGT-14 with the Registrar of Companies within 30 days of passing the special resolution, attaching the certified resolution and ESOP scheme.
⚠
Pitfall:
Late filing attracts additional fees up to 12x the normal rate.
Week 4
Process 5
Issuing Grant Letters
Issue individual grant letters to selected employees specifying number of options, vesting schedule, exercise price, and acceptance terms. Maintain ESOP Register (Form SH-6).
⚠
Pitfall:
Missing employee acknowledgement creates enforceability gaps.
Week 5
Process 6
Vesting Period Management
Track vesting milestones, handle leavers (good leaver vs bad leaver clauses), accelerate vesting on liquidity events, and update the ESOP register quarterly.
⚠
Pitfall:
Manual tracking in spreadsheets fails at scale — invest in cap-table software.
Ongoing
Process 7
Exercise & Allotment
Employee pays exercise price, company allots shares, and files Form PAS-3 within 30 days. Perquisite tax (FMV minus exercise price) is deducted as TDS at exercise.
⚠
Pitfall:
Forgetting Rule 3(8) FMV valuation by Merchant Banker triggers tax notices.
Exercise
Process 8
Liquidity & Capital Gains
On sale of shares (buyback, secondary, or IPO), employees pay capital gains tax — short-term or long-term depending on holding period from allotment date.
⚠
Pitfall:
Employees often don't know cost basis = FMV at exercise, not exercise price.
Exit
Process 9
Compliance & Disclosures
Disclose ESOP details in the Board's Report annually, maintain SH-6 register, file PAS-3 for each allotment, and reconcile option pool in cap table.
⚠
Pitfall:
Auditors flag missing disclosures during statutory audit, delaying signoff.
Annual
Everything You Need
Documents Required
The complete checklist of statutory documents and ROC filings needed to issue ESOPs in India.
Minutes of Board Meeting
Records board approval of the ESOP scheme and grant.
Minutes of General Meeting
Records shareholder approval passed at the EGM/AGM.
Special Resolution for ESOP
Mandatory shareholder vote authorising the ESOP scheme.
Board's Report
Annual report must include ESOP disclosures per Companies Act.
ESOP Register (SH-6)
Statutory register tracking grant, vesting, and exercise events.
MGT-14 Filing
Filed with ROC to register the special resolution within 30 days.
PAS-3 Filing
Return of allotment filed within 30 days of share allotment.
Grant Letters
Signed grant letters issued to each eligible employee.
Knowledge Base
ESOP Insights
Practical guides to help you navigate ESOP compliance, taxation, and best practices.
🏛️
ComplianceMar 2025 · 5 min read
ROC Filings for ESOPs — Deadlines You Can't Miss
MGT-14, PAS-3, SH-7 — every filing mapped to its deadline with penalty implications for delays.
Read
📊
ValuationFeb 2025 · 6 min read
Grant-Stage vs Exercise-Stage Valuation — Key Differences
Why you need a Registered Valuer at grant but a Merchant Banker at exercise, and how each impacts tax treatment.
Read
⚖️
LegalJan 2025 · 7 min read
ESOP Scheme Document — What Must Be Included
A clause-by-clause guide to drafting an ESOP scheme that's legally compliant and employee-friendly.
Read
Transparent Pricing
About the ESOP Cost Calculator
Understand exactly what an ESOP costs your company — before you commit a single rupee. Our free ESOP Cost Calculator is built for Indian founders, CFOs and HR leaders who want a clear, line-item view of everything that goes into running an Employee Stock Option Plan — from the first board resolution to the final exercise event years later.
Instead of vague "starting from" quotes, the tool breaks every ESOP project into the same three phases we follow internally: Scheme Setup, Grant & Allotment, and Exercise & Ongoing Compliance. You pick what your company actually needs and see the total update live.
Phase 1
Scheme Setup & Legal
ESOP scheme document, SHA provisions, board & shareholder resolutions, MGT-14 ROC filing, participation agreement and grant letter templates.
Phase 2
Grant, Valuation & Allotment
Merchant banker / Cat-I valuation, FMV report under Rule 11UA, grant cycles, board approvals, employee onboarding and SH-6 register updates.
Phase 3
Exercise & Ongoing Compliance
Exercise event handling, perquisite tax computation, TDS via Form 24Q, PAS-3 return of allotment, cap-table updates and annual compliance.
How the calculator works
The calculator mirrors the way a real ESOP project is scoped. You move through three phases, toggle the deliverables you need, and the total cost — along with statutory fees and timelines — recalculates instantly. No emails, no sales calls, no hidden line items.
- Transparent fixed fees for every deliverable — no hourly billing.
- Add or remove items like valuations, grant cycles or exercise events.
- See ROC, stamp duty and statutory fees called out separately.
- Get an estimated delivery timeline along with the price.
Who should use it?
- Early-stage founders planning their first ESOP pool ahead of a seed or Series A round and wanting realistic legal + valuation budgets.
- Growth-stage CFOs & HR heads running multiple grant cycles a year who need predictable, recurring compliance costs across vesting, exercise and tax.
- Companies preparing for IPO or M&A who need a clean cap table, audited ESOP records and properly filed PAS-3 / MGT-14 history.
What's included in every quote
- Drafting and review by qualified company secretaries and lawyers
- Coordination with your auditor and merchant banker
- All ROC filings (MGT-14, PAS-3, Form 3, etc.) prepared end-to-end
- Black-Scholes / intrinsic value workings for accounting purposes
- Employee-facing grant letters, FAQs and exercise communications
What sits outside the quote
- GST @ 18% — shown separately on the final invoice
- Government fees (ROC, stamp duty) charged at actuals
- Merchant banker's signing fee for Cat-I valuation reports
- Personal income-tax filing for individual employees
- Litigation, disputes or representations before tribunals
Why upfront ESOP pricing matters
Avoid budget creep
ESOP projects routinely run 2–3× over budget when valuations, ROC fees and grant-cycle work are quoted later. Seeing the full picture up front prevents that.
Stay audit-ready
Investors and acquirers diligence the ESOP trail line by line. A properly costed, properly filed scheme keeps your cap table defensible.
Make better grant decisions
When you know the true cost of running an option pool, you can size it correctly — and explain the dilution math to your board with confidence.
Indicative ESOP cost in India
Every ESOP project is scoped differently, but the ranges below give you a realistic starting point before you use the calculator. All figures are professional fees only — GST @ 18% and government fees (ROC, stamp duty, merchant banker signing fees) are charged separately at actuals.
| Deliverable | Typical fee (₹) | Timeline |
|---|---|---|
| ESOP scheme drafting + board / shareholder resolutions | ₹75,000 – ₹1,25,000 | 2–3 weeks |
| MGT-14 filing with ROC | ₹10,000 – ₹15,000 | 1 week |
| Cat-I merchant banker valuation (Rule 11UA) | ₹60,000 – ₹1,50,000 | 2–3 weeks |
| Grant cycle (per cycle): letters, board approval, register | ₹25,000 – ₹50,000 | 1–2 weeks |
| Exercise event + perquisite tax & TDS (Form 24Q) | ₹35,000 – ₹75,000 | 1–2 weeks |
| PAS-3 return of allotment | ₹15,000 – ₹25,000 | 1 week |
| Annual ESOP compliance retainer | ₹60,000 – ₹1,20,000 / yr | Ongoing |
Starter setup
₹1.0 L – ₹1.5 L
Scheme drafting, resolutions and MGT-14 — ideal for first-time pools at seed stage.
Setup + first grant
₹2.0 L – ₹3.0 L
Everything in starter plus Cat-I valuation, one grant cycle and employee letters.
Full-cycle annual
₹3.5 L – ₹6.0 L
Multiple grants, exercise events, PAS-3 filings and year-round ESOP compliance.
* Indicative ranges based on typical Indian unlisted-company engagements. Final pricing depends on company size, number of grantees, valuation complexity and grant frequency. Use the calculator above for an exact quote.
Common questions about ESOP cost in India
Q.How much does it cost to set up an ESOP in India?
A typical ESOP scheme setup — including the scheme document, SHA provisions, board and shareholder resolutions, and MGT-14 filing — starts at a fixed professional fee. The exact number depends on whether you also need a fresh valuation, multiple grant cycles, or a trust structure. The calculator above shows the all-in figure for your specific scope.
Q.Is a merchant banker valuation mandatory for ESOPs?
For unlisted companies, a Category-I merchant banker valuation under Rule 11UA is required for perquisite tax calculation at the time of exercise. The calculator includes valuation as an optional add-on so you can decide based on your grant and exercise calendar.
Q.What recurring compliance does an ESOP create?
Each year you'll typically need updated valuations for new grants, PAS-3 filings for allotments, perquisite tax computation and TDS via Form 24Q, plus updates to the SH-6 register and cap table. The calculator lets you model multiple grant and exercise events in a single quote.
Real Results from Real Clients
Scheme setup wrapped in under 6 weeks
Accorp's ESOP team handled our entire scheme setup — from drafting to ROC filings — in under 6 weeks. The fixed-fee model gave us clarity from day one.
Co-founder
SaaS Startup
Audit-ready Ind AS 102 workings
The valuation reports were audit-ready and delivered on time. Our Series A due diligence sailed through thanks to clean Ind AS 102 workings.
CFO
D2C Brand
Saved us from PAS-3 penalties
We didn't even know PAS-3 had a 30-day deadline until Accorp flagged it. They've saved us from penalties multiple times during exercise windows.
Head of People
Fintech