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ESOP TDS under Section 192 and Form 24Q in Delhi

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: From INR 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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📌 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.

Delhi mixes old-economy promoter-led groups with a fast-growing consumer-tech base. The IT and trading hub around Nehru Place, the corporate and BFSI offices in Connaught Place, and the Saket-Aerocity corporate belt all run option and RSU schemes, and the city sits next to the MCA headquarters at Shastri Bhawan. Whether you are a family-run group granting sweat equity or a D2C startup with a broad option pool, the Section 192 TDS on each exercise has to be deposited and reported in Form 24Q. Patron Accounting computes that TDS, files Form 24Q each quarter, and issues a reconciled Form 16 for Delhi employers.

ESOP TDS is the employer obligation to withhold tax on the ESOP perquisite at exercise. Because the benefit is non-cash, Delhi payroll teams, especially promoter-led groups issuing sweat-equity shares for the first time, 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.

What Is ESOP TDS under Section 192

When a Nehru Place trading firm or a Saket consumer-tech venture lets staff exercise their options, the gain that lands in the employee's hands is salary in the eyes of the tax law, and the employer has to withhold on it. That withholding is ESOP TDS: tax deducted on the ESOP perquisite under Section 192 of the Income-tax Act 1961. The perquisite equals the fair market value on the exercise date minus the exercise price, and the tax is taken at the employee's average slab rate in the very month the option is exercised.

The quarterly home for this withholding is Form 24Q, which consolidates every rupee of salary TDS for a Delhi employer's TAN, so the ESOP gain rides in alongside ordinary salary rather than in a separate return. One change is coming: from 1 April 2026 the Income-tax Act 2025 carries the identical mechanism forward under Section 392, with the quarterly return renamed Form 138 and the certificate Form 130. Nothing about how you compute or deposit changes; only the section and form numbers shift.

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

In Delhi the obligation reaches a wide spread of employers, from a single Connaught Place finance house granting sweat equity to a product team in Aerocity vesting a hundred staff at once. The rule is the same in both cases: the moment you deduct TDS on even one ESOP exercise, that quarter's Form 24Q has to carry it.

Indian subsidiaries of US and Singapore parents, common in the Saket-Aerocity belt, withholding on foreign-parent ESOP and RSU benefits, frequently for NRI and returning-NRI employees.
Nehru Place IT and electronics-trading companies and LLPs whose staff exercise listed or unlisted options.
D2C and consumer-tech startups claiming the Section 192(1C) deferral for eligible employees.
HR and payroll desks across these firms that own Form 16 issuance and the year-end reconciliation.

Statutory anchor: Rule 31A requires any employer deducting salary TDS to file Form 24Q for that quarter. Miss it and Section 234E levies Rs 200 per day, while your Delhi staff are left unable to draw their Form 16.

ESOP TDS for Delhi Employers

Delhi runs two very different equity-pay worlds side by side. Around Nehru Place, India's largest IT and electronics trading hub, and across the consumer-tech offices in the Saket-Aerocity corporate belt, broad-based option pools are now standard, while the BFSI and corporate towers of Connaught Place lean on listed-share and sweat-equity grants. Sitting beside the MCA headquarters at Shastri Bhawan, Delhi promoters are quick to file the RoC paperwork but often overlook that the Section 192 TDS on each exercise is a separate, central obligation reported in Form 24Q against your TAN.

Two patterns recur in Delhi. First, promoter-led groups in Connaught Place issuing sweat-equity shares for the first time miss that the perquisite is salary income and under-deduct in the exercise month. Second, D2C and consumer-tech startups in Saket and Aerocity assume DPIIT recognition alone defers the TDS, when Section 192(1C) also requires the IMB certificate under Section 80-IAC to hold valid.

Local example: a Nehru Place fintech whose 15-employee cohort exercises options in Q3 must add each perquisite to that month's salary, deposit the TDS by 7 January, and report it in the Q3 Form 24Q due 31 January. We size a sell-to-cover so the non-cash perquisite does not leave staff with a cash shortfall, then reconcile the Annexure II in Q4 to the Form 16.

Our ESOP TDS and Form 24Q Services

Service	What We Do
Section 192 TDS Computation	We value the perquisite, apply the average slab rate with surcharge and cess, and fold it into the employee's pay run for the exercise month.
Section 192(1C) Deferral	For Saket and Aerocity startups, we verify DPIIT and IMB eligibility, apply the deferral, and watch the 48-month, sale, or exit trigger.
Sell-to-Cover Coordination	We size the share sale that funds the tax so a non-cash gain never leaves a Nehru Place team short of cash.
Form 24Q Quarterly Filing	We build Annexure I each quarter and Annexure II in Q4, validate PANs, and upload the FVU against your Delhi TAN.
Form 16 Issuance	We pull Part A and Part B from TRACES and hand them to staff by 15 June.
Notice and Default Resolution	We close out short-deduction and late-filing defaults flagged by CPC-TDS.

Our Process

The Quarterly TDS Cycle in 6 Steps

For Delhi employers from Connaught Place to Aerocity, we drive the whole Section 192 and Form 24Q loop each quarter, from the first perquisite working through to a reconciled Form 16.

Step 1

Receive the perquisite working

For each employee we lock in (FMV on exercise minus exercise price) x shares, using the listed price for Connaught Place grants or a merchant-banker FMV for unlisted Nehru Place and Saket firms.

FMV minus price x shares

Working In 01

Step 2

Compute Section 192 TDS

The perquisite is stacked onto the month's salary and withheld at the employee's average slab rate, surcharge and cess included.

Slab rate Surcharge + cess

TDS Computed 02

Step 3

Deposit the TDS

The deducted tax goes in via ITNS 281 by the 7th of the next month, with March allowed until 30 April.

ITNS 281 By 7th

Deposited 03

Step 4

File Form 24Q

Annexure I goes in every quarter against your Delhi TAN, with Annexure II added in Q4. From FY 2026-27 this return becomes Form 138.

Annexure I Annexure II (Q4)

Filed 04

Step 5

Generate Form 16

Once all four quarters are accepted, we draw Part A and Part B down from TRACES.

Part A + B From TRACES

Generated 05

Step 6

Issue and reconcile

Form 16 reaches staff by 15 June only after we tie it back to Form 12BA and each employee's Form 26AS.

By 15 June Matches 26AS

Reconciled 06

Documents Checklist

To file a clean quarter for a Delhi entity, we ask for the following before the deposit date:

The Delhi entity's TAN and TRACES login.
A per-employee perquisite working showing the exercise date and the FMV source, whether a recognised-exchange price or a merchant-banker certificate for an unlisted Nehru Place or Saket company.
Employee PAN and the monthly salary figures for the quarter, including NRI staff drawing on foreign-parent grants.
Challan (ITNS 281) details for the TDS already deposited.
DPIIT recognition and the IMB certificate where a startup is claiming the Section 192(1C) deferral.
The earlier quarters' 24Q acknowledgements for the same financial year.

Why ESOP TDS trips up Delhi payroll desks

The gain is on paper, not in cash, so there is no salary outflow to net the tax against. The employer has to either claw the TDS back from the employee or run a sell-to-cover on the freshly exercised shares, and still slot it into the right quarter's Form 24Q.

Common Challenges and How We Solve Them

Challenge	Impact	How Patron Accounting Solves It
Connaught Place promoters treat sweat equity as capital, not salary, and under-deduct	Section 201 interest at 1% or 1.5% per month	We fix the perquisite as salary and compute the right slab TDS, surcharge and cess before the deposit date.
Saket and Aerocity startups assume DPIIT recognition alone defers the tax	Invalid deferral, retro demand	We confirm the IMB certificate under Section 80-IAC before applying any Section 192(1C) deferral.
A non-cash gain with no salary to net against	Funding shortfall for staff	We design a sell-to-cover or employee recovery so the TDS is funded and deposited on time.
Form 16 mismatch with an employee's Form 26AS, often for NRI staff on foreign-parent grants	Employee notices	We reconcile Annexure II, Form 12BA and Form 26AS before Form 16 leaves our hands.
Plan documents still cite the old section and form numbers	Outdated references	We renumber 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	From INR 4,999 (Exl GST and Govt. Charges)
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

Accurate slab TDS on a non-cash gain, whether a listed Connaught Place grant or an unlisted Nehru Place option, keeping Section 201 interest off the table.

On-time every quarter

Form 24Q filed before the due date each quarter against your Delhi TAN, so the Rs 200 per day Section 234E fee never starts running.

Reconciled Form 16

Form 16 tied back to Form 12BA and Form 26AS, sparing your staff, including NRI option-holders, an unwanted notice.

Updated for Act 2025

Your plan documents and templates renumbered for the Income-tax Act 2025 (192 to 392, 24Q to 138, 16 to 130).

Trusted by Employers and Payroll Teams

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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

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.

How is the ESOP perquisite valued for a Connaught Place listed company?

For a listed company in the Connaught Place BFSI belt, the perquisite is the average of the opening and closing price on the recognised stock exchange on the exercise date, minus the exercise price, times the shares. For unlisted Nehru Place or Saket firms, a SEBI-registered merchant banker certifies the FMV on the exercise date. We capture the correct basis before computing Section 192 TDS for the Form 24Q return.

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.

How does a Nehru Place company fund TDS on a non-cash ESOP perquisite?

Whether you are an IT trading firm near Nehru Place or a promoter-led group in Connaught Place, the ESOP perquisite is non-cash, so the Section 192 TDS has to be funded in cash. Employers either recover the tax from the employee, deduct it against other cash salary in the same month, or run a sell-to-cover on the exercised shares. The full TDS is deposited by the 7th of the next month and reported in Form 24Q against the Delhi entity TAN, so the cash funding has to be arranged before the exercise is processed.

Can a Saket or Aerocity D2C startup defer ESOP TDS?

Yes, if it qualifies. Many consumer-tech and D2C startups in the Saket-Aerocity corporate belt issue broad option pools. Under Section 192(1C), the employer needs both DPIIT recognition and an IMB certificate under Section 80-IAC to defer TDS to the earliest of 48 months from the end of the relevant assessment year, the date of sale, or cessation of employment. We verify the IMB certificate first, as DPIIT recognition alone does not unlock the deferral.

What happens if the ESOP TDS is not deposited?

If the TDS is not deposited on time, interest of 1 percent or 1.5 percent per month is levied under Section 201, and late filing of Form 24Q attracts a fee of Rs 200 per day under Section 234E.

Which RoC and jurisdiction applies to ESOP filings for Delhi companies?

Delhi companies are registered with the Registrar of Companies (RoC) Delhi under the MCA, whose headquarters sits at Shastri Bhawan in the city. Corporate ESOP allotment filings go to the RoC, but the ESOP TDS itself is a central income-tax obligation reported in Form 24Q against your TAN through TRACES, not the RoC. We handle the Section 192 computation and quarterly return for employers across Nehru Place, Connaught Place, Saket and Aerocity, in person and remotely.

Quick Answers

Who deducts TDS on ESOP perquisite? The employer deducts it as salary TDS under Section 192.
Which TDS return reports it? It is reported in Form 24Q (replaced by Form 138 from FY 2026-27).
What are the quarterly filing due dates? The Form 24Q due dates are 31 July, 31 October, 31 January and 31 May.
By when must the TDS be deposited? The deducted TDS must be deposited by the 7th of the following month.
Which TDS certificate is issued to employees? Employees receive Form 16 by 15 June (replaced by 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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Content Created: 24 June 2026 | Last Updated: | Next Review: 24 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).