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ESOP TDS under Section 192 and Form 24Q in Mumbai

For BKC, Lower Parel and Powai employers under SEBI's watch, we value the exercise perquisite, withhold Section 192 TDS, and file Form 24Q against your Mumbai TAN.

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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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.

Mumbai sits at the centre of India's equity-pay economy. The financial-services and listed-company HQs in BKC and Lower Parel, the SaaS and media belt across Andheri and Powai, and the Goregaon-Vikhroli startup corridor all run large ESOP and RSU programmes. With SEBI headquartered in BKC, listed-company option schemes here face close scrutiny, which makes precise Section 192 withholding and clean Form 24Q reporting non-negotiable. Patron Accounting computes that TDS, files Form 24Q each quarter, and issues a reconciled Form 16 for Mumbai employers.

ESOP TDS is the employer obligation to withhold tax on the ESOP perquisite at exercise. Because the benefit is non-cash, Mumbai payroll teams, especially listed companies in BKC running broad-based option pools, 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 BKC fintech or a Powai deep-tech startup lets an employee exercise their stock options, the gain that lands in that pay cycle is a salary perquisite, and the employer has to withhold tax on it under Section 192 of the Income-tax Act 1961. That perquisite equals the fair market value on the exercise date minus the exercise price, multiplied by the number of shares, and the tax comes out at the employee's average slab rate in the exercise month. With SEBI headquartered at BKC and so many Mumbai issuers listed, the FMV for a listed Lower Parel or BKC company is simply the SEBI-formula market price on the exercise date, which is precise but leaves no room for a missed deposit.

Form 24Q is the single return that carries every rupee of salary TDS to the department, so the ESOP perquisite rides alongside ordinary monthly salary rather than being filed separately. Note the transition ahead: from 1 April 2026 the Income-tax Act 2025 governs the identical withholding under Section 392, the quarterly return becomes Form 138, and the certificate becomes Form 130. Nothing about the mechanics changes for a Mumbai employer; only the statutory numbering shifts.

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

ESOP TDS for Mumbai Employers

Mumbai carries the densest mix of listed-company and large-cap ESOP plans in India. Financial institutions and listed groups in BKC and Lower Parel, technology and media firms in Andheri and Powai, and venture-backed teams in the Goregaon-Vikhroli corridor file under the Registrar of Companies (RoC) Mumbai. The TDS on each exercise, however, is a central income-tax obligation deposited against your TAN and reported in Form 24Q, regardless of where in the city you sit.

For listed Mumbai companies, the FMV is the SEBI-prescribed market price on the exercise date, and broad-based exercise windows can push hundreds of employees into a single quarter's Form 24Q. For unlisted firms, a merchant-banker valuation sets the FMV. Either way, the Section 192 perquisite is added to salary, withheld at the average slab rate with surcharge and cess, and reconciled into Annexure II for Form 16.

Local example: a Lower Parel listed company runs an exercise window in December. Every perquisite is added to that month's salary, the TDS is deposited by 7 January, and the lot is reported in the Q3 Form 24Q due 31 January. We reconcile each Form 16 to Form 12BA and Form 26AS before issue to avoid employee notices.

Who This Applies To

If even one option holder exercises in a quarter, the employer is in scope, and Mumbai's finance and SaaS ecosystems produce a steady stream of these events. The following employers across the city carry the obligation:

BKC and Lower Parel finance, fintech and listed groups whose staff exercise SEBI-priced listed ESOPs.
Andheri and Powai SaaS and media companies with unlisted, merchant-banker-valued option pools.
Indian arms of foreign parents withholding on overseas-parent ESOP and RSU benefits for Mumbai teams.
Venture-backed startups in the Goregaon-Vikhroli corridor weighing the Section 192(1C) deferral for eligible employees.
HR and payroll desks that must issue and reconcile Form 16 after each exercise.

Statutory anchor: any employer that deducts salary TDS must file Form 24Q for that quarter under Rule 31A. Skip it and a Rs 200 per day fee bites under Section 234E, and your Mumbai employees are left unable to obtain their Form 16.

Our ESOP TDS and Form 24Q Services

Service	What We Do
Section 192 TDS Computation	We value the perquisite off the SEBI-formula price for listed BKC or Lower Parel issuers, compute slab-rate TDS, and fold it into the employee's monthly Mumbai payroll run.
Sell-to-Cover Coordination	For a non-cash BKC fintech or Powai SaaS perquisite, we size the share sale that funds the TDS so no payroll shortfall ever forms.
Form 24Q Quarterly Filing	Every quarter we build Annexure I, add Annexure II in Q4, validate employee PANs, and upload the FVU against your Mumbai TAN.
Form 16 Issuance	We pull Form 16 Part A and Part B from TRACES and hand them to your employees by 15 June.
Section 192(1C) Deferral	For Goregaon-Vikhroli corridor startups that hold DPIIT and IMB recognition, we apply the deferral and watch for the trigger event.
Notice and Default Resolution	We clear short-deduction and late-filing defaults raised by CPC-TDS.

Our Process

The Quarterly TDS Cycle in 6 Steps

Whether you are a listed BKC group running a broad exercise window or a Powai startup with a handful of exercises, this is the quarter-by-quarter cycle we drive for Mumbai employers, from the first perquisite working through to a reconciled Form 16.

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

Per-employee perquisite working, with exercise date and the FMV source (SEBI-formula price for a listed BKC issuer, or the merchant-banker certificate for an unlisted Andheri or Powai firm).
Your Mumbai entity's TAN and TRACES login.
Employee PANs and monthly salary data for the quarter.
ITNS 281 challan details for the TDS already deposited.
DPIIT recognition and IMB certificate, where a corridor startup is claiming the Section 192(1C) deferral.
Acknowledgements of the earlier 24Q quarters in the same financial year.

Why the ESOP perquisite catches Mumbai payroll teams out

The gain is non-cash, so there is no fresh salary outflow to deduct from. A BKC fintech therefore has to either recover the tax from the employee or run a sell-to-cover, and then still report the perquisite in the correct quarter's Form 24Q against its Mumbai TAN.

Common Challenges and How We Solve Them

Challenge	Impact	How Patron Accounting Solves It
A BKC issuer's wide exercise window dumps hundreds of perquisites into one quarter	Volume and deadline crunch	We process the batch, validate every PAN, and file the Form 24Q before the due date.
Non-cash perquisite with no salary to deduct from	Funding shortfall	We structure a sell-to-cover or employee recovery so the TDS is funded and deposited on time.
Under-deduction at a Powai SaaS startup triggers Section 201 interest	1% or 1.5% per month	We compute the correct slab TDS with surcharge and cess ahead of the deposit date.
Form 16 mismatches the employee's Form 26AS	Employee notices	We reconcile Annexure II, Form 12BA and Form 26AS before any Form 16 is issued.
Plan documents still quote the old section and form numbers	Outdated references	We refresh 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	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-rate TDS on the non-cash perquisite, valued off the SEBI price for listed BKC issuers, so Section 201 interest never bites.

On-time every quarter

Form 24Q filed ahead of the due date each quarter, even through a heavy exercise window, so the Rs 200 per day Section 234E fee stays off your books.

Reconciled Form 16

Form 16 tied out against Form 12BA and Form 26AS before it reaches your Mumbai employees, heading off mismatch notices.

Updated for Act 2025

Your plan documents and payroll templates refreshed for the Income-tax Act 2025 renumbering to Section 392, Form 138 and Form 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 listed Mumbai company?

For a listed BKC or Lower Parel company, the FMV on the exercise date is the SEBI-formula market price (the average of the opening and closing price on the recognised stock exchange). The perquisite is that FMV minus the exercise price, times shares. For unlisted Mumbai firms, a SEBI-registered merchant banker certifies the FMV. The result is added to salary and withheld under Section 192.

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 is ESOP TDS handled for a BKC fintech using sell-to-cover?

For a fintech in BKC or Lower Parel, the ESOP perquisite is non-cash, so most employers run a sell-to-cover: part of the exercised shares is sold to fund the Section 192 TDS and the net shares go to the employee. The employer still deposits the full TDS by the 7th of the next month and reports it in Form 24Q against the Mumbai entity TAN. We document the sell-to-cover working so the perquisite, the shares sold, and the deposited TDS reconcile in Annexure II and the eventual Form 16.

Can a Goregaon or Vikhroli corridor startup defer ESOP TDS?

Only if it holds both DPIIT recognition and an IMB certificate under Section 80-IAC. Many venture-backed Mumbai startups have DPIIT recognition but not the IMB certificate, so they cannot use the Section 192(1C) deferral. Where it does qualify, TDS defers to the earliest of 48 months from the end of the relevant assessment year, the date of sale, or cessation of employment.

What happens if ESOP TDS is not deposited on time?

If the TDS is not deposited on time, interest of 1 percent or 1.5 percent per month applies 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 Mumbai companies?

Mumbai companies are registered with the Registrar of Companies (RoC) Mumbai under the MCA for corporate filings, while ESOP TDS is a central income-tax obligation filed in Form 24Q against your TAN through TRACES, not the RoC. We run Section 192 computation and quarterly filing for employers across BKC, Lower Parel, Andheri, Powai and the Goregaon-Vikhroli corridor, 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).