Startup Founder ITR Filing - Overview
📌 TL;DR - ITR for Startup Founders Services at a Glance
Founders typically file ITR-2 (salary + capital gains + house property + other sources). ESOP exercise triggers a perquisite under Section 17(2)(vi) read with Rule 3(8) FMV, taxable in the FY of exercise unless Section 192(1C) deferment applies (DPIIT + 80-IAC startups: TDS deferred to the earliest of 48 months / sale / cessation). Sale of ESOP shares is a capital gains event with FMV at exercise as cost basis. Post 23 July 2024: unlisted LTCG at 12.5% without indexation (Finance Act 2024); listed STCG 20% (Section 111A) and listed LTCG above INR 1.25 lakh at 12.5% (Section 112A). Angel tax (Section 56(2)(viib)) is abolished from FY 2024-25. Section 54F (one residential house, INR 10 crore cap) and Section 54GB (residential property to eligible startup) save LTCG. Carry is generally business income. Schedule FA is mandatory for foreign holdings. Patron Accounting starts from INR 2,499 one-time.
Startup founder ITR is the most cap-table-heavy individual return in the Indian tax landscape. A typical founder reports four distinct income types - salary from the startup (with the Section 17(2)(vi) ESOP perquisite where ESOPs were exercised in the FY), capital gains from sale of founder shares / ESOP shares (Section 111A for listed STCG, Section 112A for listed LTCG, Section 112 for unlisted - now 12.5% without indexation for transfers from 23 July 2024 per the Finance (No. 2) Act 2024), other sources (interest, dividend), and where applicable house property income. The form is almost always ITR-2 (no business income); ITR-3 only where the founder simultaneously runs an independent consulting or professional practice generating business income separate from the startup.
The most consequential founder-specific provision is Section 192(1C) - for DPIIT-recognised startups eligible under Section 80-IAC (i.e., having received Inter-Ministerial Board approval), TDS on the ESOP perquisite is deferred to the earliest of (a) 48 months from the end of the AY in which the ESOP was allotted, (b) the date of sale of the underlying shares, or (c) the date of cessation of employment. Section 191(2) mirrors this for the employee tax payment obligation. Combined with the post-Finance Act 2024 abolition of Section 56(2)(viib) angel tax (effective FY 2024-25, for all investor classes) and the restructured unlisted LTCG rate (12.5% without indexation), the founder tax planning surface has changed materially. Cap table discipline - tracking grant date, vesting schedule, exercise date, FMV at exercise (Rule 3(8)), and sale date for each tranche - drives both the perquisite computation and the subsequent capital gains cost basis. Patron Accounting LLP runs an end-to-end founder ITR engagement starting from INR 2,499 one-time per FY return.
Content is reviewed quarterly for accuracy.