ESOP Startup TDS Deferral under Section 192(1C)

Defer ESOP perquisite tax for your team, the right way. If your startup is DPIIT-recognised and IMB-certified under Section 80-IAC, Patron Accounting confirms eligibility and structures the Section 192(1C) deferral so employees do not pay tax on illiquid shares at exercise.

Section 192(1C) deferral solves the cash-flow shock of ESOP tax. At exercise, an employee normally owes slab-rate tax on a paper gain in unlisted shares they cannot sell. For eligible startups, this deferral postpones that tax until a real liquidity event or the outer time limit. Patron Accounting has structured 80-IAC and ESOP benefits for DPIIT startups for over 15 years.

Content is reviewed quarterly for accuracy.

The deferral is available only to employees of startups meeting every Section 80-IAC condition. DPIIT recognition by itself does not enable it.

• Incorporated as a Pvt Ltd company or LLP between 1 April 2016 and 31 March 2030.
• Annual turnover not exceeding Rs 100 crore in the relevant financial year.
• DPIIT-recognised under the Startup India framework.
• Holds a valid IMB certificate of eligible business under Section 80-IAC.
• Not formed by splitting up or reconstruction of an existing business.

Statutory anchor: only an eligible startup under Section 80-IAC may defer ESOP TDS under Section 192(1C); of around 1.97 lakh DPIIT-recognised startups, around 3,700 hold the IMB certificate that unlocks this benefit.

• DPIIT Certificate of Recognition.
• Section 80-IAC IMB certificate of eligible business.
• Certificate of incorporation confirming the date and entity type.
• Turnover figures for the relevant financial years.
• ESOP scheme, grant letters and exercise records with allotment dates.
• Perquisite computation per employee for each exercise event.

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free ESOP TDS Deferral consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

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Patron Accounting LLP is a CA and CS firm with 15+ years advising DPIIT startups on 80-IAC, ESOP structuring and founder tax.

With offices in Pune, Mumbai, Delhi and Gurugram, Patron Accounting serves businesses across India, both in-person and remotely.

This deferral sits on top of the ESOP tax stack. For the underlying employee computation and the employer withholding, see our ESOP management and compliance services, which cover the perquisite under Section 17(2)(vi) and the TDS under Section 192 and Form 24Q.

To become eligible, start with startup registration and DPIIT recognition. For scheme administration, see our ESOP management and compliance services, and employees can file through ITR for salary or ITR for ESOP employees. See also the full ESOP services hub.

Governing provision: Section 192(1C) of the Income-tax Act 1961, inserted by the Finance Act 2020, allows an eligible startup under Section 80-IAC to defer ESOP TDS. From 1 April 2026, Section 392(3) read with Section 289(3) of the Income-tax Act 2025 continues the relief.

Window: 48 months from the end of the assessment year of allotment under the 1961 Act, and 60 months from the end of the Tax Year of allotment under the 2025 Act.

Eligibility: Section 80-IAC (now Section 140 of the 2025 Act) requires DPIIT recognition and an IMB certificate, incorporation between 1 April 2016 and 31 March 2030, and turnover up to Rs 100 crore.

Timing on trigger: on the earliest of window expiry, sale or exit, the employer must deduct and pay the tax within 14 days, at the allotment-year slab rate.

Authoritative sources: the Income-tax Act and Rules, the Income Tax Department / CBDT, Startup India / DPIIT recognition, and DPIIT, Ministry of Commerce and Industry.

Once a trigger event occurs, the deferred tax must be deducted and paid within 14 days. Missing it exposes the employer to interest under Section 201 and the employee to a return mismatch. Track the 48 or 60-month limit, sales and exits from the day of allotment.

The Section 192(1C) deferral is a powerful but narrow benefit: only DPIIT-recognised, IMB-certified startups qualify, and the rules on triggers, timing and rate are easy to get wrong.

Patron Accounting LLP, a CA and CS firm with 15+ years of startup-tax experience, confirms eligibility, structures the deferral, and tracks the triggers so founders can offer ESOPs without saddling employees with upfront tax.