How are ESOPs/RSUs taxed for Startup Founders & Employees at exercise?

ESOPs/RSUs are taxed twice: first as a perquisite (salary income) at exercise — the difference between fair market value and the exercise price is added to taxable salary and taxed at slab rates, with TDS deducted by the employer.

How are ESOPs/RSUs taxed for Startup Founders & Employees again at sale?

At sale, the difference between the sale price and the fair market value (already taxed at exercise) is taxed as capital gains — long-term or short-term depending on the holding period. For foreign-listed company ESOPs, holdings must also be disclosed in the Foreign Assets (FA) schedule of the ITR.

Updated 13 Oct 2026

ESOP Taxation Guide for Startup Founders & Employees

How founder and employee ESOPs are taxed at exercise and at sale, including startup-specific deferral rules. with Form 26AS/AIS reconciled before your return...

Quick answer

ESOPs/RSUs are taxed twice — as salary perquisite at exercise, and as capital gains at sale — with foreign-company grants needing FA schedule disclosure. Indus Tax handles both computations correctly.

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