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ESOP TDS under Section 192 and Form 24Q

Reviewed by CA and CS Team, Patron Accounting LLP ICAI & ICSI Registered| 15+ Years Experience| Last Updated: Verify Credentials →

Documents: perquisite working, TAN, challan, employee PAN and salary data.

Fees: quarterly 24Q filing starting from Rs 4,999 (Exl GST and Govt. Charges).

Applies to: every employer deducting TDS on an ESOP exercise event.

Due dates: Q1 31 Jul, Q2 31 Oct, Q3 31 Jan, Q4 31 May.

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Employers and payroll teams trust Patron Accounting to compute ESOP perquisite TDS, file Form 24Q on time and issue a reconciled Form 16 every quarter.

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What This Service Covers

📌 TL;DR - ESOP TDS and Form 24Q Services at a Glance

On an ESOP exercise, the employer must deduct TDS on the perquisite at the employee slab rate under Section 192, report it in Form 24Q each quarter, and issue Form 16. We run that full cycle.

Deduct, deposit and report TDS on the ESOP perquisite correctly, every quarter. Patron Accounting handles Section 192 withholding on the non-cash ESOP benefit, files Form 24Q, and issues Form 16 so your payroll passes assessment cleanly.

ESOP TDS is the employer obligation to withhold tax on the ESOP perquisite at exercise. Because the benefit is non-cash, payroll teams routinely under-deduct, miss the Form 24Q deadline, or issue a Form 16 that does not reconcile with the employee return. Patron Accounting has run salary-TDS compliance for Indian employers for over 15 years.

Content is reviewed quarterly for accuracy.

What Is ESOP TDS under Section 192

ESOP TDS is the tax an employer deducts on the ESOP perquisite as part of salary under Section 192 of the Income-tax Act 1961. The perquisite is the fair market value on the exercise date minus the exercise price, and TDS is withheld at the employee average slab rate in the month of exercise.

From 1 April 2026, the Income-tax Act 2025 governs the same withholding under Section 392, with the quarterly return as Form 138 and the certificate as Form 130. The mechanism is unchanged; only the section and form numbers move. Form 24Q consolidates all salary TDS, so the ESOP perquisite is reported alongside regular salary.

Key Terms for ESOP TDS and Form 24Q:

Form 24Q: the quarterly salary-TDS return under Rule 31A, replaced by Form 138 from FY 2026-27.
Annexure II: the Q4-only annual salary breakup that drives Form 16 on TRACES.
Sell-to-cover: selling part of the exercised shares to fund the TDS on a non-cash perquisite.
Section 192(1C): the deferral provision that postpones TDS for eligible startup employees.

Withheld under Section 192

Who This Applies To

Every employer that deducts TDS on an ESOP exercise must report it in Form 24Q for that quarter, even if only one employee is affected.

Companies and LLPs whose employees exercise listed or unlisted ESOPs.
Indian subsidiaries withholding on foreign-parent ESOP and RSU benefits.
Startup employers applying Section 192(1C) deferral for eligible employees.
HR and payroll teams responsible for Form 16 issuance and reconciliation.

Statutory anchor: an employer that deducts TDS on salary must file Form 24Q for that quarter under Rule 31A, failing which a fee of Rs 200 per day applies under Section 234E and employees cannot obtain Form 16.

Our ESOP TDS and Form 24Q Services

Service	What We Do
Section 192 TDS Computation	We compute slab-rate TDS on the ESOP perquisite and integrate it with the employee monthly salary.
Sell-to-Cover Coordination	We size the share sale needed to fund the TDS so the non-cash perquisite does not create a shortfall.
Form 24Q Quarterly Filing	We prepare Annexure I every quarter and Annexure II in Q4, validate PANs, and upload the FVU.
Form 16 Issuance	We generate Form 16 Part A and Part B from TRACES and issue to employees by 15 June.
Section 192(1C) Deferral	We apply the deferral for eligible startup employees and track the trigger event.
Notice and Default Resolution	We resolve short-deduction and late-filing defaults raised by CPC-TDS.

Our Process

The Quarterly TDS Cycle in 6 Steps

From the perquisite working to a reconciled Form 16, we run the full Section 192 and Form 24Q cycle every quarter.

Step 1

Receive the perquisite working

We capture (FMV on exercise minus exercise price) x shares for each employee.

FMV minus price x shares

Working In 01

Step 2

Compute Section 192 TDS

We add the perquisite to salary and withhold at the average slab rate, including surcharge and cess.

Slab rate Surcharge + cess

TDS Computed 02

Step 3

Deposit the TDS

We pay via ITNS 281 by the 7th of the following month, and by 30 April for March.

ITNS 281 By 7th

Deposited 03

Step 4

File Form 24Q

We submit Annexure I each quarter; we add Annexure II in Q4. From FY 2026-27 this is Form 138.

Annexure I Annexure II (Q4)

Filed 04

Step 5

Generate Form 16

We download Part A and Part B from TRACES once all four quarters are accepted.

Part A + B From TRACES

Generated 05

Step 6

Issue and reconcile

We issue Form 16 by 15 June and confirm it matches Form 12BA and the employee Form 26AS.

By 15 June Matches 26AS

Reconciled 06

Documents Checklist

Perquisite computation per employee with exercise date and FMV source.
Employer TAN and TRACES login.
Employee PAN and monthly salary data for the quarter.
Challan (ITNS 281) details for TDS deposited.
DPIIT recognition and IMB certificate, if applying Section 192(1C) deferral.
Prior-quarter 24Q acknowledgements for the financial year.

Why ESOP TDS trips up payroll

The perquisite is non-cash. There is no salary outflow to deduct from, so the employer must either recover the TDS from the employee or run a sell-to-cover, then still report it in Form 24Q in the correct quarter.

Common Challenges and How We Solve Them

Challenge	Impact	How Patron Accounting Solves It
Non-cash perquisite, no salary to deduct from	Funding shortfall	We design a sell-to-cover or employee recovery so TDS is funded and deposited on time.
Under-deduction triggers Section 201 interest	1% or 1.5% per month	We compute the correct slab TDS with surcharge and cess before the deposit date.
Form 16 mismatch with employee Form 26AS	Employee notices	We reconcile Annexure II, Form 12BA and Form 26AS before issuing Form 16.
Plan documents still cite old section and form numbers	Outdated references	We update references for the Income-tax Act 2025 (192 to 392, 24Q to 138, 16 to 130).

ESOP TDS and Form 24Q Fees

Fee Component	Amount
Patron Accounting Professional Fees	Starting from Rs 4,999 (Exl GST and Govt. Charges) per quarter
Scope of the starting fee	Section 192 computation, the quarterly return, and challan reconciliation
Form 16 issuance and Section 192(1C) deferral	Quoted on scope

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 and Form 24Q consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

Time Taken

Stage	Estimated Timeline
Quarterly Form 24Q prepared and filed (clean data)	2 to 4 working days before the due date
TDS deposit	By the 7th of the following month

Share exercise data as soon as the exercise happens, since the TDS must be deposited by the 7th of the following month and reported in that quarter's Form 24Q.

Key Benefits

Why Use a Professional

Correct slab TDS

Correct slab TDS on the non-cash perquisite, avoiding Section 201 interest.

On-time every quarter

On-time Form 24Q every quarter, avoiding the Rs 200 per day Section 234E fee.

Reconciled Form 16

Form 16 that reconciles with Form 12BA and Form 26AS, preventing employee notices.

Updated for Act 2025

Plan documents and templates updated for the Income-tax Act 2025 renumbering.

Trusted by Employers and Payroll Teams

10,000+ Businesses | 4.9 Google Rating | 50,000+ Documents Processed | 15+ Years

Patron Accounting LLP is a CA and CS firm with 15+ years running payroll TDS and equity-compensation withholding for Indian employers.

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

In-House vs Professional Filing

Aspect	In-House Payroll	Patron Accounting
Non-cash perquisite TDS	Often under-deducted	Slab TDS with sell-to-cover planned
24Q timeliness	Deadline pressure, late fees	Filed before due date, every quarter
Form 16 accuracy	Mismatch with 26AS	Reconciled before issue by 15 June
Act 2025 renumbering	Old form names linger	Templates updated to 392 / 138 / 130
Default resolution	Reactive	CPC-TDS defaults handled end to end

Related Services

This page covers the employer withholding. For the employee-side computation of the benefit, see our ESOP management and compliance services, which cover the perquisite under Section 17(2)(vi). For routine, non-ESOP salary withholding, use our TDS return filing for Form 24Q.

For end-to-end salary processing, see payroll processing and management services. New deductors can start with TAN registration, and employees can file through our ITR for salary service. See also the full ESOP services hub.

Legal and Compliance Framework

Governing provision: Section 192 of the Income-tax Act 1961 requires the employer to deduct TDS on salary, including the ESOP perquisite. From 1 April 2026, Section 392 of the Income-tax Act 2025 carries the same obligation.

Return: Rule 31A requires Form 24Q each quarter (Form 138 from FY 2026-27), with Annexure II in Q4 driving Form 16 (Form 130).

Deferral: Section 192(1C) (Section 392(3) from FY 2026-27) defers TDS for employees of eligible startups certified under Section 80-IAC, now Section 140 of the 2025 Act.

Penalty exposure: late filing attracts Rs 200 per day under Section 234E, capped at the TDS amount; short or late deduction attracts interest of 1 percent or 1.5 percent per month under Section 201.

Authoritative sources: the Income Tax Department / TRACES, the Income-tax Act and Rules, Protean (TIN) e-TDS, and DPIIT / Startup India (80-IAC).

How does an employer deduct TDS on an ESOP perquisite?

The employer adds the ESOP perquisite (FMV on exercise minus exercise price, times shares) to the employee salary and deducts TDS at the average slab rate under Section 192, including surcharge and cess. Because the benefit is non-cash, the employer either recovers the tax from the employee or runs a sell-to-cover, then deposits the TDS by the 7th of the next month.

What are the Form 24Q due dates?

Form 24Q is filed quarterly under Rule 31A: Q1 (Apr to Jun) by 31 July, Q2 (Jul to Sep) by 31 October, Q3 (Oct to Dec) by 31 January, and Q4 (Jan to Mar) by 31 May. From 1 April 2026 the return is Form 138, but these due dates remain unchanged. Late filing attracts Rs 200 per day under Section 234E.

ESOP par TDS kaun kaatta hai?

ESOP perquisite par TDS employer kaatta hai, exercise ke samay, Section 192 ke tahat slab rate par. Kyunki yeh non-cash benefit hai, employer ya to employee se recover karta hai ya sell-to-cover karta hai.

Is the ESOP perquisite reported in Form 24Q?

Yes. The ESOP perquisite is part of salary, so it is reported in Form 24Q along with regular salary TDS. The detailed annual breakup, including the perquisite, is filed in Annexure II in the Q4 return, which then drives the Form 16 issued to the employee.

When is Form 16 issued for ESOP TDS?

Form 16 is issued by 15 June following the financial year. Part A is auto-generated on TRACES once all four Form 24Q returns are accepted, and Part B carries the salary and perquisite breakup from Annexure II. From FY 2026-27, Form 16 is replaced by Form 130 under the Income-tax Act 2025.

Can a startup defer ESOP TDS?

Yes. Under Section 192(1C), an employer that is an eligible startup with DPIIT recognition and an IMB certificate under Section 80-IAC can defer TDS to the earliest of 48 months from the end of the relevant assessment year, the date of sale, or cessation of employment. The slab rate of the allotment year applies.

ESOP TDS jama nahi kiya to kya hota hai?

Agar TDS samay par jama nahi kiya, to Section 201 ke tahat 1 percent ya 1.5 percent prati maah interest lagta hai, aur Form 24Q late filing par Section 234E ke tahat Rs 200 prati din ka fee lagta hai.

Do the new Income-tax Act 2025 form numbers change the process?

No. The process is unchanged. Only the references change: Section 192 becomes Section 392, Form 24Q becomes Form 138, and Form 16 becomes Form 130 for exercises from 1 April 2026. Due dates and computation stay the same. ESOP plan documents citing the old numbers should be updated.

Quick Answers

Who deducts? The employer, under Section 192.
Which return? Form 24Q (Form 138 from FY 2026-27).
Due dates? 31 Jul, 31 Oct, 31 Jan, 31 May.
Deposit by? 7th of the following month.
Certificate? Form 16 by 15 June (Form 130 from FY 2026-27).

Why Timing Matters

TDS on an ESOP exercise must be deposited by the 7th of the next month and reported in that quarter's Form 24Q. A missed deposit triggers Section 201 interest, and a late return triggers a Rs 200 per day fee under Section 234E. File early, before the quarter closes.

Get Your ESOP TDS Filed

ESOP TDS under Section 192 and Form 24Q is a recurring, per-exercise obligation that exposes employers to interest and late fees when the non-cash perquisite is mishandled.

Patron Accounting LLP, a CA and CS firm with 15+ years of payroll-TDS experience, computes the withholding, files Form 24Q on time, and issues a reconciled Form 16, keeping both employer and employee compliant.

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ESOP TDS and Form 24Q Support Across India

In-person and remote Section 192 computation, quarterly Form 24Q filing and Form 16 issuance for employers.

We run ESOP TDS and Form 24Q compliance for employers nationwide, with offices in Pune, Mumbai, Delhi and Gurugram and remote support across India. The computation, quarterly filing and Form 16 issuance is handled the same way wherever you are based.

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Content Created: 2 June 2026 | Last Updated: | Next Review: 2 September 2026 | Reviewed By: CA & CS Team, Patron Accounting LLP

This page is reviewed every three months for Income-tax Act 2025 form and section notifications, the Form 24Q to 138 transition guidance, due-date or TDS-rate changes, 80-IAC (Section 140) amendments, and Budget updates (Tier 1 freshness).