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ESOPs · checked 11 November 2026
An ESOP is the right to buy company shares later at a fixed price, earned over a vesting schedule and taxed at exercise and again at sale.
Vesting usually runs 3 to 5 years and never less than one year in India, and you still pay the strike price to own the shares. At exercise, fair value minus the strike is taxed as salary even if you cannot sell: exercising 1,000 options at Rs 10 on a Rs 110 share means Rs 1 lakh of salary that year, which an eligible DPIIT-recognised startup's employees can defer. Read the grant letter for the cliff and the exercise window if you leave.
Every question on it 17 answers
- What is an ESOP, and how does it work? Wealth
- How do I set up an ESOP pool and grant equity to my early employees legally? Starting Up
- What actually happens when my ESOPs vest? Wealth
- Do I owe tax when I exercise my ESOPs in India? Wealth
- My ESOPs look valuable on paper. Is that real money yet? Wealth
- What happens to my ESOPs if I leave the company? Wealth
- How do I tell if an ESOP grant in a job offer is any good? Wealth
- What happens to my ESOPs when the company gets acquired? Wealth
- What is a strike price, and why does it matter for my ESOPs? Wealth
- Should I exercise my ESOPs early, and does that actually save tax? Wealth
- My company offered to buy back some of my vested ESOPs. Should I take it? Wealth
- Do I pay tax twice on my ESOPs, once when I exercise and again when I sell? Wealth
- My ESOPs are in the US parent company, not the Indian entity. What changes for me? Wealth
- Can I defer the tax on my ESOPs because my company is DPIIT-recognised? Wealth
- How big should my ESOP pool be, and why does the term sheet always want it carved out pre-money? Starting Up
- How much equity should I set aside for an ESOP pool for employees? Starting Up
- My startup wants to run a buyback for early employees and angels. How is that taxed from 1 April 2026? Starting Up
The readingMost used across these answers
- What is an ESOP? Meaning, taxation, and how it works Read · 13 answers
- The Holloway Guide to Equity Compensation Read · 10 answers
- How ESOPs are taxed in India Read · 7 answers
- Equity 101 for founders and employees Read · 5 answers
- Employee Stock Options for Startups (Startup India) Read · 4 answers
- ESOP Taxation in India: Complete Guide Read · 4 answers
- The Equity Equation Read · 2 answers
- Tax Playbook for the Startup Ecosystem (May 2026) Read · 2 answers
- How to Read Your ESOP Grant Letter Read · 2 answers
- How secondary sales work at private companies Read
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