Answer

Startup fundraising · Startup Tax Benefits

ESOP Tax Deferral (Sec 392, old 192(1C))

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  1. Facts

    Employees of DPIIT-recognised + Sec 140, Income-tax Act 2025 (old Sec 80-IAC) certified startups get TDS deferred on ESOP perquisite until the earliest of: sale of shares, cessation of employment, or 5 years from allotment.

  2. Provisions and law

    • Sec 392 (old 192(1C))

  3. Analysis

    Without deferral: employee owes tax at exercise date even if shares can't be sold. With deferral: tax deferred to liquidity event, when employee actually has cash to pay. Requires: DPIIT recognition + Sec 140 (old Sec 80-IAC) IMB certificate both active at time of grant.

  4. Conclusion

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