ESOP AND TDS

From the FY 2020-21, an employee receiving ESOPs from an eligible start-up need not pay tax in the year of exercising the option. The TDS on the 'perquisite' stands deferred to earlier of the following events: Expiry of five years from the year of allotment of ESOPs. 

ESOPs would be taxed as perquisite, the value of which would be (on date of allotment) = (FMV per share – Exercise price per share) x number of shares allotted. The amount calculated above as perquisite value of ESOP i.e. Rs. 4,00,000 shall form part of X's salary and be taxable in the year of allotment of such shares.