Usually yes, and this catches people out. In India, exercising ESOPs is itself a taxable event: the gap between the fair market value on the exercise date and your strike price is treated as a perquisite and taxed as salary income, even though you have not sold anything or received any cash. A later sale is taxed again, as capital gains on the growth from exercise to sale. Eligible DPIIT-recognised startups can defer the perquisite tax, which changes the math a lot. The exact numbers are specific to your case, so treat this as the shape of the problem and confirm with a CA before you exercise.
3 resources, 2 India-specific, 3 link-checked.
The India-specific piece: perquisite tax at exercise, capital gains at sale, and the startup deferral, with worked examples in rupees.
From ClearTax by ClearTax
Open cleartax.in →The most thorough plain-language reference on vesting, cliffs, strike prices, and exercise windows. Read it once and stop being confused by your grant letter.
From Holloway by Holloway
Open holloway.com →A plain-language India primer on what an ESOP actually is, how vesting and exercise work, and how it is taxed.
From ClearTax by ClearTax
Open cleartax.in →The same ground, over in Raise money, our Starting Up track.
