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ESOP Vesting and Forfeiture Tracking

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

Vesting tracking: every milestone tracked, month by month.

Forfeiture recording: leaver forfeitures recorded in SH-6 with dates and causes.

Alerts and notifications: upcoming-vesting alerts and employee notices.

Fees: tracking from Rs 9,999 per year (Exl GST and Govt. Charges).

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    Companies running live ESOPs trust Patron Accounting to track vesting, record forfeitures in SH-6 and keep the option pool reconciled all year round.

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    What This Service Covers

    📌 TL;DR - ESOP Vesting Tracking Services at a Glance

    We track your ESOP vesting milestones month by month, record forfeiture events in the SH-6 register with dates and causes, notify employees of vested options, and send automated alerts for upcoming vesting, as an ongoing subscription. Your records stay current and audit-ready.

    Options vest every month, employees come and go, and each event has to be recorded, notified and reflected in your SH-6 register, or your cap table quietly drifts out of truth. Patron Accounting tracks it for you on a subscription basis: monthly vesting milestones, forfeiture events recorded in SH-6, employee notifications, and automated alerts for upcoming vesting.

    An ESOP is not a one-time event; it is a living schedule. Every month options vest, and every time someone leaves, options are forfeited. If those events are not tracked and recorded as they happen, the gap is discovered later, in an audit or a funding round, when reconstructing it is painful. This service keeps the schedule and the register accurate continuously.

    Content is reviewed quarterly for accuracy.

    Why Vesting and Forfeiture Need Active Tracking

    Vesting and forfeiture are constant, dated events, and records that live in scattered spreadsheets and emails drift out of truth fast.

    • Vesting is continuous: options vest on a schedule, often monthly or quarterly, so the vested and unvested split changes all the time.
    • Forfeitures are event-driven: every leaver triggers a forfeiture of unvested options that must be recorded and returned to the pool.
    • The pool must reconcile: granted, vested, exercised and forfeited options must always tie back to the authorised pool.
    • Records are examined: auditors and investors check vested and unvested balances and the SH-6 register closely.

    Key Terms for ESOP Vesting Tracking:

    • Vesting: options becoming exercisable on a schedule, often after a one-year cliff.
    • Forfeiture: unvested options lost on separation, returned to the pool.
    • Exercise window: the post-termination period to exercise vested options before they lapse.
    • Pool reconciliation: keeping granted, vested and forfeited tied to the authorised pool.
    APL-05 ESOP Vesting Tracking
    Recorded under Rule 12(10), Form SH-6

    What We Track and Record

    Every event we track is reflected in your SH-6 register, so the statutory record and the live schedule never diverge:

    • Monthly vesting milestones: we track each tranche as it vests, employee by employee.
    • Forfeiture events: we record unvested options forfeited on each leaver.
    • SH-6 entries: we post grants, vesting, exercise and forfeiture with dates and causes.
    • Employee notifications: we notify employees when their options vest.
    • Upcoming-vesting alerts: we send reminders ahead of vesting and exercise dates.
    • Pool reconciliation: we keep granted, vested and forfeited tied to the pool.

    What the Subscription Includes

    ServiceWhat We Do
    Vesting Milestone TrackingWe maintain each employee's vesting schedule and track every tranche as it vests, keeping a live vested and unvested position.
    Forfeiture Event ManagementWe capture each leaver, apply the scheme's leaver terms, record the forfeiture in SH-6 and return the options to the pool.
    SH-6 UpkeepWe post grants, vesting, exercise and forfeiture to the SH-6 register with dates and causes, keeping it audit-ready.
    Alerts and NotificationsWe send upcoming-vesting alerts to the company and vesting notices to employees, plus leaver-window flags.
    Periodic ReportingWe provide a regular vesting and forfeiture report, with the pool reconciliation, so you always have a clear picture.
    Our Process

    How the Subscription Runs

    A continuous monthly cadence keeps your vesting and forfeiture record live, reconciled and audit-ready all year.

    Step 1

    Onboard the data

    We load your grants, vesting schedules and current SH-6 position.

    Grants + schedules Current SH-6
    Onboarded 01
    Step 2

    Track each month

    We update vesting milestones and the vested and unvested split.

    Milestones Vested split
    Tracked 02
    Step 3

    Record events

    We post forfeitures and exercises to SH-6 as they happen.

    Forfeitures Exercises
    SH-6
    Recorded 03
    Step 4

    Alert and notify

    We send vesting alerts to the company and notifications to employees.

    Vesting alerts Employee notices
    Notified 04
    Step 5

    Report and reconcile

    We provide periodic reports tying everything back to the pool.

    Periodic report Pool reconciled
    Reported 05

    How Forfeiture Works, and Why It Must Be Recorded

    Forfeiture is where most tracking errors happen, because it is triggered by people leaving rather than by the calendar.

    Leaver typeUnvested optionsVested options
    ResignationForfeited, return to poolExercisable within the window, then lapse
    Termination for causeForfeitedOften forfeited too, per the scheme
    Death or incapacityOften accelerated or preserved for heirsExercisable by heirs or nominees

    Each forfeiture must be recorded in SH-6 with the date and cause, and the forfeited options returned to the pool so it reconciles. We capture the leaver event, apply the scheme's good-leaver or bad-leaver terms, and post the entry, so nothing is missed and the pool is always correct.

    Alerts and employee notifications

    We send upcoming-vesting alerts to the company ahead of each vesting date and exercise deadline, vesting notices to employees when their options vest, and leaver-window flags when a leaver's exercise window is running, so no one is caught out.

    Common Challenges and How We Solve Them

    ChallengeImpactHow Patron Accounting Solves It
    Vesting tracked in stale spreadsheetsRecords drift out of truthMaintain a live, reconciled vesting position.
    Forfeitures not recorded on exitPool overstatedCapture each leaver and post the SH-6 entry.
    Pool no longer reconcilesDiligence red flagTie granted, vested and forfeited back to the pool.
    Employees unaware of vested optionsDisputes and lapsesSend vesting notifications and window flags.

    Tracking Subscription Fees

    Fee ComponentAmount
    Patron Accounting Professional FeesStarting from Rs 9,999 per year (Exl GST and Govt. Charges)
    Scope of the annual subscriptionOngoing vesting tracking, forfeiture recording in SH-6, alerts, employee notifications and periodic reporting for a standard option base
    Larger employee counts, complex schedules and listed-company trackingScoped on top

    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 Vesting Tracking consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

    Time and Cadence

    StageEstimated Timeline
    Onboarding your grants and current SH-6 positionA few days
    Ongoing serviceMonthly cadence: update vesting, record forfeitures, alert, notify and report

    Because it is continuous, your records never fall behind, and there is no year-end scramble to reconstruct a year of vesting and exits before an audit or a fundraise.

    Key Benefits

    Why Subscribe to Tracking

    Live vesting position

    A live, reconciled vesting position, not a stale spreadsheet.

    Every forfeiture recorded

    Every forfeiture recorded in SH-6 with its date and cause.

    Employees informed

    Employees kept informed, so equity stays motivating and disputes are rare.

    Always diligence-ready

    Audit and diligence-ready records all year round, with no reconstruction.

    Trusted by Companies Running Live ESOPs

    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 tracking ESOP vesting, forfeitures and SH-6 records for Indian companies.

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

    A Note on Tax: Vesting Is Not a Taxable Event

    EventTax treatment
    VestingNot a taxable event; a compliance and record task only
    ExerciseTaxed as a salary perquisite on FMV minus exercise price
    SaleTaxed as capital gains on the eventual disposal
    This serviceKeeps the vesting and forfeiture record straight; the tax at exercise is handled by payroll and tax services

    Related Services

    This works hand in hand with our ESOP SH-6 register administration service: tracking feeds the events, the register administration maintains the statutory book. Both sit within our ESOP management and compliance services.

    Exercises run through issue of shares, the perquisite TDS through payroll services, and the records support your secretarial audit and statutory audit. See also the full ESOP services hub.

    Legal Framework

    Vesting: under Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, there must be a minimum of one year between grant and vesting; the scheme sets the full vesting schedule and the treatment of options on separation.

    Forfeiture: unvested options lapse or are forfeited on separation as the scheme provides, and vested options are exercisable only within the scheme's post-termination window, after which they may lapse.

    SH-6 register: Rule 12(10) requires the company to maintain the Form SH-6 register recording all grants, vesting, exercise, lapse and forfeiture; it is not filed with the MCA but must be available for inspection in audits and diligence.

    Non-compliance: failure to maintain the register or comply with Rule 12 can attract penalties under the Companies Act, alongside the reputational and trust cost of inaccurate records.

    Authoritative sources: the Ministry of Corporate Affairs (Rule 12, SH-6, Section 450), the Companies Act and Share Capital Rules, and the Income Tax Department (perquisite at exercise, capital gains).

    What happens to unvested options when an employee leaves?

    Unvested options are forfeited automatically when an employee leaves before they vest, and they return to the ESOP pool, unless the scheme specifically provides otherwise. Vested options are different: they can usually be exercised within a defined post-termination window, commonly 30 to 90 days, after which even the vested options may lapse. On death or permanent incapacity, most schemes accelerate or preserve vesting for the employee's heirs or nominees. Each of these events needs to be tracked and recorded against the scheme terms.

    Why do we need to record forfeitures in SH-6?

    Because Rule 12(10) of the Share Capital Rules requires the Form SH-6 register to record every grant, vesting, exercise, lapse and forfeiture, with dates and causes. Recording forfeitures keeps a clean audit trail and ensures the option pool reconciles, with forfeited options returned to it. The register is not filed with the MCA but must be available for inspection during audits and diligence, and missing forfeiture entries are exactly the kind of gap that surfaces at the worst time, in a funding round.

    ESOP vesting track karna kyun zaroori hai?

    Kyunki options har mahine vest hote hain aur jab koi employee chhodta hai to unvested options forfeit ho jaate hain. Agar yeh events time pe track aur SH-6 mein record na hon, to vested aur unvested ka hisaab galat ho jaata hai aur pool reconcile nahi hota. Yeh gap baad mein audit ya funding round mein pakda jaata hai. Hum monthly vesting track karte hain, forfeitures record karte hain, aur employees ko notify karte hain.

    Do you pay tax when options vest?

    No. Vesting itself is not a taxable event. ESOPs are taxed at two later stages: as a salary perquisite at exercise, on the difference between the fair market value and the exercise price, and as capital gains when the shares are eventually sold. So vesting tracking is purely a compliance and record-keeping matter, not a tax trigger. The tax arises only when the employee exercises, which is handled through payroll and tax processes, separate from this tracking service.

    How is this different from SH-6 register administration?

    They are complementary. SH-6 register administration is about maintaining the statutory register itself as the official book of record. This service is the ongoing event tracking that feeds that register: we monitor vesting milestones month by month, capture forfeiture events as people leave, send alerts and employee notifications, and ensure each event is reflected in SH-6. Many companies take both, so the tracking and the register stay perfectly in step; we can provide them together.

    What alerts and notifications do you send?

    We send upcoming-vesting alerts to the company ahead of each vesting date and any exercise deadline, vesting notifications to employees when their options vest so they know what they hold, and leaver-window flags when a departing employee's exercise window is running. These keep the company on top of its obligations and ensure employees do not unknowingly lose options by missing a deadline, which is a common and avoidable cause of disputes.

    Can you track for a company with a complex vesting schedule?

    Yes. We handle time-based, graded, milestone and performance-based vesting, including cliffs and mixed schedules across different grant tranches and employee groups. Complex schedules are exactly where manual tracking breaks down and errors creep in, so they benefit most from a managed service. We model your specific schedules and track each tranche accurately; heavier complexity simply sits in a higher tier of the subscription.

    Is this a one-time service or ongoing?

    It is an ongoing, subscription-style service, renewed annually, because vesting and forfeiture are continuous. Each month options vest and employees may leave, so the value is in keeping the record current all year rather than reconstructing it once. This differs from our one-time deliverables like scheme drafting or a templates pack. Many companies start with a deliverable and then move onto this subscription to keep everything maintained.

    Quick Answers

    • Unvested on exit? Forfeited, back to the pool.
    • Vested on exit? Exercise within the window, then lapse.
    • Record where? SH-6, with date and cause.
    • Tax at vesting? No, tax is at exercise and sale.
    • Engagement? Annual subscription.

    Why Track Continuously

    The cost of not tracking is invisible until it is not: a year of unrecorded vesting and forfeitures surfaces in an audit or a due-diligence exercise, where reconstructing it is slow, expensive and reputationally awkward, and where a pool that does not reconcile raises real questions. Tracking continuously, for a modest annual fee, means the record is always right and there is never a reconstruction to do. Keep the schedule and register live, not retrospective.

    Keep Your ESOP Records Live

    Vesting and forfeiture are the moving parts of every ESOP, and keeping them tracked, recorded and communicated is what keeps the scheme accurate, compliant and trusted.

    Patron Accounting LLP, a CA and CS firm with 15+ years of ESOP experience, runs this as an affordable annual subscription, tracking vesting milestones, recording forfeitures in SH-6, alerting the company and notifying employees, so your records stay live and audit-ready, and pairs it with full register administration and management whenever you need more.

    Book a Free Consultation - No Obligation.

    ESOP Vesting Tracking Across India

    In-person and remote vesting milestone tracking, forfeiture recording and SH-6 upkeep for companies running live ESOPs.

    We track vesting and forfeitures for companies nationwide, with offices in Pune, Mumbai, Delhi and Gurugram and remote support across India. The monthly tracking, forfeiture recording and SH-6 upkeep is handled the same way wherever you are based.

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

    This page is reviewed every six months for changes to Rule 12 vesting or SH-6 requirements, leaver and forfeiture treatment norms, exercise-window conventions, and the perquisite and capital-gains tax treatment of ESOPs (Tier 2 freshness).