ESOP valuations serve two masters: the grant needs a fair value the board can adopt, and the exercise triggers a perquisite computation the payroll must withhold on. Getting the sequence right — plan, valuation, grant, vesting, exercise — keeps the scheme an incentive instead of a tax dispute.
| Item | Position |
|---|---|
| Grant | Board adopts a valuation basis for exercise pricing |
| Exercise | Perquisite = FMV at exercise minus exercise price; TDS through payroll |
| Sale | Capital gains on the spread over FMV/exercise basis, per holding period |
| Eligible startups | A TDS-deferral regime exists for qualifying companies — evaluated case-wise |
The valuation report for the relevant event (grant or exercise), the computation working shared with payroll, and a valuation log so successive grants show a consistent, explainable trajectory.
The ESOP scheme, cap table with pool details, recent financials and projections, latest round terms, grant register, and for exercises: the exercise notices and employee-wise detail.
Scheme administration, grant records and payroll execution remain with the company; valuations rely on the records and projections provided.
Drafting the ESOP scheme itself, legal opinions on scheme validity, and payroll processing are separate scopes (scheme design support is available under the ESOP implementation service).
Do we need a fresh valuation for every grant?
Not necessarily — a valuation can serve grants for a reasonable period if nothing material changed. A funding round, major contract or business shift is exactly what makes reuse indefensible; the log records the reasoning either way.
Who determines the exercise-date FMV for unlisted companies?
The income-tax rules prescribe how the perquisite FMV is determined for unlisted shares — the engagement applies the prescribed basis and documents it for payroll. The mechanics are covered in the linked ESOP guide.
Can the exercise price be ₹10 when the fair value is ₹500?
The scheme can set a low exercise price; the tax then lands as a larger perquisite at exercise. The design choice is commercial — what matters is that the tax consequence is computed and withheld correctly, not discovered later.
Is any tax outcome assured?
No — computations follow the law as applied to your facts; no outcome or acceptance is assured by any professional.
Do you coordinate with our CS for the scheme filings?
Yes — valuation outputs are handed to the CS/legal team in the form their filings need, with queries answered.
The applicable scope, documentation, professional responsibilities and timelines are agreed in an engagement letter before commencement.
ESOP Plan DesignStartup Valuation (11UA)Cap Table ManagementRequest a Scope DiscussionThis page describes the service in general terms as on 6 August 2026 and is not professional advice or an assurance of any outcome. Registrations, filings, refunds and departmental outcomes depend on facts and the concerned authority. Figures and due dates change; verify current positions before acting.
| Compliance | Due | Note |
|---|---|---|
| FLA return (RBI) | 15 July (annual) | All entities with FDI/ODI on books |
| FC-GPR | 30 days from allotment | For fresh foreign investment |
| Valuation report (Rule 11UA / FEMA) | Before issue price is fixed | Method and valuer depend on route |
| ESOP: board/valuation/PAS-3 chain | Event-based | Perquisite TDS on exercise |
| DPIIT recognition | Anytime (before benefits) | Needed for 80-IAC and angel-tax relief |
Dates as generally applicable on 15 July 2026; extensions/notifications can change them — confirm current dates before relying.
Plan terms and event calendar understood.
Events covered, cadence, fees.
Method applied for the specific event.
Report + computations to board/payroll.
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