Answer

1. F

   Facts

   For employees of DPIIT-recognised startups that also have Sec 140, Income-tax Act 2025 (old Sec 80-IAC) IMB certificate, TDS on ESOP perquisite is deferred until the earliest of: (1) Sale of shares by the employee (2) Cessation of employment (3) 5 years from the date of allotment of shares.

2. P

   Provisions and law

   • IT Act 1961, Sec 192(1C) (now 392) | Finance Act 2020
3. A

   Analysis

   Why this matters: Without deferral, an employee exercises options worth ₹50L perquisite, owes ₹15L+ in TDS immediately, even though they hold illiquid unlisted shares with no cash to pay. With deferral, the tax hits only when they sell and have cash.

4. C

   Conclusion

   1. 1DPIIT Recognition Certificate, must be active at time of grant
   2. 2Sec 140 (old Sec 80-IAC) IMB Certificate, the step 90% of startups miss (apply separately from DPIIT recognition)
   3. 3Both certificates must be valid at the time of ESOP allotment
   4. 4Company must maintain a record of eligible grants vs non-eligible grants

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.