In short: An ESOP consultant coordinates four things a Delhi-NCR company needs to get right at the same time — a scheme that complies with Section 62(1)(b) of the Companies Act, 2013, a valuation from the correct professional for the transaction in question, a tax position that matches the Income-tax Act, 2025, and documentation that survives a funding round or an IPO due diligence. Regulatory responsibility for ESOP valuation shifted materially on 2 January 2026, when SEBI replaced merchant bankers with independent Registered Valuers for listed-company schemes — a change most Delhi advisory content has not yet caught up with.
CA Murli Chandak is an IBBI-Registered Valuer for the asset class Securities or Financial Assets, registration number IBBI/RV/07/2021/14408, and has completed more than 300 valuation assignments across more than 7 countries. For a Delhi, Gurugram or Noida founder or CFO planning an ESOP pool, the practical questions are rarely about the concept of an ESOP — they are about which professional must sign which certificate, how the December 2025 SEBI change affects a listed or soon-to-be-listed company, and what the perquisite tax actually costs an employee under the rules now in force.
1. Contents
- Why Delhi-NCR companies are turning to ESOPs
- What an ESOP is, in four stages
- What changed for Delhi-NCR companies in 2026
- The legal framework: unlisted and listed companies
- Who values what: registered valuer, merchant banker or chartered accountant
- ESOP taxation in India: the two-stage framework
- What this ESOP advisory covers
- Experience behind Delhi-NCR engagements
- Documents needed to start
- How a Delhi-NCR engagement runs
- Common mistakes Delhi-NCR startups make with ESOPs
- Frequently asked questions
2. Why Delhi-NCR companies are turning to ESOPs
Delhi, Gurugram and Noida host one of India’s largest concentrations of DPIIT-recognised startups, spanning fintech, SaaS, consumer internet, healthtech and manufacturing-adjacent technology businesses. Competing for the same senior engineering, product and sales talent as Bengaluru and Mumbai, while conserving cash between funding rounds, is what drives most Delhi-NCR founders toward an ESOP pool rather than a purely cash-based compensation structure.
An ESOP only delivers that benefit if the pool is sized correctly, the scheme is compliant from the first grant, and the valuation and tax positions are defensible when a due diligence team, an auditor or an Assessing Officer eventually looks at them. Getting these four elements wrong is discovered, almost without exception, at the least convenient moment — during a Series A term sheet negotiation or an IPO readiness review.
3. What an ESOP is, in four stages
An Employee Stock Option Plan gives an employee the right, not the obligation, to acquire company shares at a predetermined exercise price after satisfying vesting conditions. No ownership passes at grant — only the right to acquire shares later.
| Stage | What happens |
|---|---|
| 1. Grant | The company allots a specified number of options to an eligible employee, recorded in a grant letter setting out the exercise price and vesting schedule |
| 2. Vesting | The employee becomes eligible to exercise once the vesting conditions — typically a minimum service period, sometimes performance milestones — are satisfied |
| 3. Exercise | The employee pays the exercise price for the vested options and the company allots shares, which is when the first tax event and the first valuation requirement arise |
| 4. Sale | The employee sells the shares, subject to the company’s policies and any lock-in, triggering the second tax event |
4. What changed for Delhi-NCR companies in 2026
The Ministry of Corporate Affairs re-aligned its field offices with effect from 16 February 2026, and the change is directly relevant to the special resolution and MGT-14 filing that an ESOP scheme approval requires.
Source: Ministry of Corporate Affairs, PIB release dated 31 December 2025. The practical consequence for a Delhi-headquartered group with a Gurugram subsidiary is that the two entities now file an ESOP scheme resolution with different Registrars and different Regional Directorates — the Delhi entity with RoC NCT of Delhi-I or II and RD (NR-I), the Gurugram entity with RoC Haryana and RD (NR-II), both now seated at Chandigarh. A Noida entity is likely to fall under the newly separated RoC Noida rather than RoC Kanpur. For the full district-by-district breakdown of this split, the two NCLT benches seated in Delhi, and where IBBI itself is headquartered, see our companion guide: Registered Valuer in Delhi. Field office jurisdictions are re-notified from time to time, so the correct office for a specific registered office should always be confirmed against the MCA’s own Registrar of Companies directory before a scheme resolution is filed.
5. The legal framework: unlisted and listed companies
5.1 Unlisted companies
Most Delhi-NCR ESOP schemes sit inside unlisted private limited companies, governed by Section 62(1)(b) of the Companies Act, 2013 read with Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Rule 12 requires shareholder approval by special resolution, disclosure of the scheme’s material terms to shareholders, and a minimum period of one year between the grant of an option and its vesting. The rule does not itself require a registered valuer’s report at the scheme-approval stage — the valuation requirement arises later, and separately, for financial reporting and for the tax position at exercise.
5.2 Listed companies
A listed company’s ESOP, restricted stock unit, stock appreciation right or sweat equity scheme is governed by the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. This is the area where the law changed materially and recently. Under the original 2021 Regulations, the valuer for these schemes could be an independent chartered accountant or a merchant banker. The Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) (Second Amendment) Regulations, 2025, notified 3 December 2025 and effective from 2 January 2026, replaced that definition: Regulation 2(1)(ww) now defines “valuer” by reference to Section 247 of the Companies Act, 2013, and Regulation 34(1) now requires all fresh valuations under the Regulations to be carried out by an independent Registered Valuer. Merchant bankers were permitted a nine-month window to complete assignments already underway, ending in September 2026.
For a Delhi-NCR company that has listed, or is preparing to list, this means the valuation of its ESOP or sweat equity scheme is now squarely IBBI-Registered Valuer work, not merchant banker work — a distinction that most currently published Delhi ESOP content, including material still circulating from before December 2025, has not caught up with.
6. Who values what: registered valuer, merchant banker or chartered accountant
A large share of avoidable rejections and refiling come from engaging the wrong professional for a given certificate, not from an incorrect number. The table below sets out which professional applies to each ESOP-related requirement.
| Requirement | Who values or signs | Statutory basis |
|---|---|---|
| Approval of the ESOP scheme, unlisted company | Special resolution of shareholders; no external valuer required at this stage | Section 62(1)(b) read with Rule 12, Companies (Share Capital and Debentures) Rules, 2014 |
| Valuation for a listed company’s ESOP or sweat equity scheme | Independent Registered Valuer under Section 247, Companies Act, 2013 | Regulation 34(1), SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as amended w.e.f. 2 January 2026 |
| Fair value of options at grant, for financial reporting | Valuation professional applying an option-pricing model such as Black-Scholes | Ind AS 102, Share-based Payment |
| Perquisite fair market value at exercise, unlisted shares | Category I Merchant Banker registered with SEBI, on the exercise date or a date not more than 180 days earlier | Section 17(1)(d) read with Section 17(5)(h), Income-tax Act, 2025, and Rule 15(6), Income-tax Rules, 2026 |
| Perquisite fair market value at exercise, listed shares | Average of the opening and closing exchange price on the exercise date — no separate valuer required | Rule 15(6), Income-tax Rules, 2026 |
| Tax deducted at source on the perquisite | Employer, at the time of exercise | Section 392, Income-tax Act, 2025 |
Where a Delhi-NCR company needs more than one certificate for the same transaction, the practical answer is to build the workings on one consistent set of financial assumptions, so that the Registered Valuer’s report and the Merchant Banker’s certificate do not tell a reviewer two different stories about the same company. Where a Merchant Banker’s certificate is required alongside a registered valuer’s report, that certificate is issued by a SEBI-registered Category I Merchant Banker within the same coordinated engagement.
Not sure which certificate your ESOP grant needs? If you are planning a grant, preparing for a funding round, or an auditor has questioned last year’s ESOP valuation, a short conversation up front is usually faster and cheaper than redoing the work later. A no-charge 30-minute consultation will confirm which professional and which method apply to your transaction.
7. ESOP taxation in India: the two-stage framework
ESOPs are taxed at two separate points, and the Income-tax Act, 2025, which took effect from 1 April 2026, renumbered the relevant provisions without changing the underlying framework.
7.1 Stage 1: perquisite tax at exercise
When an employee exercises vested options, the difference between the fair market value on the exercise date and the exercise price paid is treated as a taxable perquisite under the head Salary, under Section 17(1)(d) read with Section 17(5)(h) of the Income-tax Act, 2025, computed per Rule 15(6) of the Income-tax Rules, 2026. Tax is deducted at source by the employer under Section 392 of the Act.
Worked example. An employee exercises 2,000 vested options at an exercise price of Rs 100 per share, when the fair market value determined by the Category I Merchant Banker is Rs 850 per share.
Taxable perquisite = (Rs 850 − Rs 100) × 2,000 = Rs 15,00,000, added to the employee’s salary income for the year and taxed at the applicable slab rate, with TDS deducted by the employer at the time of exercise.
7.2 Stage 2: capital gains at sale
The fair market value used to compute the Stage 1 perquisite becomes the cost of acquisition for capital gains purposes, so the same value is not taxed twice. The holding period runs from the date of allotment on exercise, not the original grant date. For unlisted shares, a holding period exceeding 24 months qualifies as long-term, taxed under Section 197 of the Income-tax Act, 2025 — the general long-term capital gains provision, successor to Section 112 of the 1961 Act — currently at 12.5 percent without indexation.
Continuing the example: the employee sells the 2,000 shares 30 months after exercise at Rs 1,400 per share. Capital gain = (Rs 1,400 − Rs 850) × 2,000 = Rs 11,00,000, taxed as long-term capital gains at 12.5 percent, before cess.
7.3 Deferred taxation for eligible startups
Employees of a DPIIT-recognised startup that also holds the Inter-Ministerial Board certification under Section 140 of the Income-tax Act, 2025 — the successor to Section 80-IAC of the 1961 Act — may defer payment of the Stage 1 perquisite tax rather than pay it in the year of exercise. Under Section 392(3) read with Section 289(3) of the 2025 Act, the successor to Section 192(1C) of the 1961 Act, the deferral runs until the earliest of:
- 60 months from the end of the tax year in which the shares were allotted, for shares allotted on or after 1 April 2026 — extended from the 48-month window that applied to allotments before that date;
- the date the employee ceases to be an employee of the company; or
- the date the employee sells the shares.
This is a deferral of payment, not an exemption — the tax is computed at the slab rate applicable in the year of allotment, and the employer’s obligation to compute and report the liability is unaffected even though cash payment is postponed.
8. What this ESOP advisory covers
- Scheme design. Pool sizing, eligibility criteria and vesting structure aligned to the company’s hiring plan and future dilution.
- Valuation coordination. Grant-date fair value for Ind AS 102 accounting, and coordination with a SEBI-registered Category I Merchant Banker for the exercise-date perquisite FMV where the company is unlisted.
- Scheme documentation. Board and shareholder resolutions, the ESOP policy document, and individual grant letters consistent with the approved scheme.
- Cap table modelling. Grants, vesting, exercises, lapses and cancellations tracked against the fully diluted capitalisation table.
- Compliance calendar. Filing deadlines tied to grant, vesting and exercise events, and to the applicable ROC and Regional Directorate for the company’s registered office.
- Employee communication. Plain-language explanation of vesting, exercise, taxation and liquidity so option holders understand what they hold.
9. Experience behind Delhi-NCR engagements
| Credential | Detail |
|---|---|
| Qualification | Fellow Chartered Accountant |
| Registration | Registered Valuer under Section 247 of the Companies Act, 2013, registered with IBBI for the asset class Securities or Financial Assets, registration number IBBI/RV/07/2021/14408 |
| Experience | More than 8 years in valuation practice |
| Volume and reach | More than 300 valuation assignments across more than 7 countries, including the United States |
| Business combinations | More than 15 purchase price allocations under Ind AS 103, and one under ASC 805 |
| Impairment | More than 30 impairment tests under Ind AS 36, and one under ASC 350 |
| Audit scrutiny | Assignments, including purchase price allocations, defended before Big Four audit teams |
| Funds | Debt and equity valuation for more than 10 Indian funds |
10. Documents needed to start
- Constitutional. Certificate of incorporation, memorandum and articles of association.
- Capital structure. Capitalisation table, shareholding pattern, and any existing ESOP pool or scheme document.
- Financial. Audited financial statements for the last 3 years, and the latest management or provisional accounts.
- Agreements. Existing shareholder or investment agreements that may restrict dilution or require investor consent.
- Workforce. Proposed grantee list or eligibility criteria, and anticipated hiring plans driving the pool size.
- Forward-looking. Board-approved business projections supporting the valuation.
11. How a Delhi-NCR engagement runs
| Step | What happens |
|---|---|
| 1 | Consultation to establish whether the company is listed or unlisted, and therefore which professionals and which certificates the scheme requires |
| 2 | Engagement letter setting out purpose, valuation date, standard applied and scope |
| 3 | Information request for the documents in Section 10, issued in tranches so drafting can begin early |
| 4 | Pool sizing and vesting structure discussion with founders and the board |
| 5 | Valuation build — grant-date fair value, and coordination with a Category I Merchant Banker for exercise-date FMV where required |
| 6 | Draft scheme documents and valuation shared for verification of facts |
| 7 | Board and shareholder approval support, followed by signed reports and ongoing administration support |
Working with a Delhi-NCR client from an Ahmedabad-based practice changes nothing about the quality of the file, and every step above runs through document-based workflows and video consultations.
12. Common mistakes Delhi-NCR startups make with ESOPs
- Pool sized without a hiring plan. An undersized pool limits future grants; an oversized pool dilutes existing shareholders for no commercial benefit.
- Vesting that is too generous or too rigid. A schedule that vests too quickly undermines retention; one that is too rigid discourages participation.
- Tax treated as an afterthought. Employees are frequently surprised by the Stage 1 perquisite tax liability at exercise, which is payable in cash on a non-cash gain.
- Valuation obtained from the wrong professional. Engaging a merchant banker for a listed-company scheme valuation after 2 January 2026, or an unregistered valuer for a Companies Act purpose, results in a certificate that will not be accepted.
- Cap table not updated in real time. Grants, exercises, lapses and cancellations that are not reflected promptly create confusion at the next funding round.
- Documentation that does not match the approved scheme. Grant letters and board resolutions that drift from the shareholder-approved scheme terms create disputes and slow down due diligence.
13. Frequently asked questions
Does an ESOP consultant have to be based in Delhi to advise a Delhi-NCR company?
No. Registration as an IBBI Registered Valuer under Section 247 is national, and most of an ESOP engagement — document review, valuation, scheme drafting and video consultations — runs through digital workflows regardless of where the advisor is based.
Is a valuation compulsory before an unlisted company launches an ESOP?
Rule 12 does not itself require a registered valuer’s report at scheme-approval stage. A valuation becomes necessary shortly afterward, for Ind AS 102 accounting at grant and for the Category I Merchant Banker’s perquisite FMV at exercise.
Who values an ESOP scheme for a listed company now?
An independent Registered Valuer under Section 247 of the Companies Act, 2013, following the SEBI (Share Based Employee Benefits and Sweat Equity) (Second Amendment) Regulations, 2025, effective 2 January 2026. Merchant bankers could complete only assignments already underway, within a nine-month transition window.
How is the ESOP perquisite tax calculated?
As the fair market value on the exercise date, less the exercise price paid, multiplied by the number of shares exercised, taxed as salary income under Section 17(1)(d) of the Income-tax Act, 2025.
Can the perquisite tax be deferred?
Yes, for employees of startups holding both DPIIT recognition and the Section 140 Inter-Ministerial Board certificate. The deferral runs for 60 months from the end of the tax year of allotment for shares allotted on or after 1 April 2026, or until the employee leaves or sells the shares, whichever is earliest.
Is the deferral an exemption from tax?
No. It postpones cash payment. The tax is computed at the slab rate applicable in the year of allotment and remains payable at the earliest trigger event.
What documents are needed to start designing an ESOP scheme?
Incorporation documents, the capitalisation table, recent financial statements, existing shareholder agreements, the proposed grantee list or eligibility criteria, and board-approved projections. A full list is set out in Section 10.
Can private limited companies in Gurugram or Noida issue ESOPs on the same basis as a Delhi company?
Yes. The Companies Act, 2013 framework is national. The only difference is the Registrar of Companies and Regional Directorate the company files with, which depends on the state and district of the registered office, as set out in Section 4.
How long does it take to design and launch an ESOP scheme?
This depends on how quickly the board and shareholders finalise the pool size and eligibility criteria, and how complete the information provided is. A realistic engagement timeline is discussed at the initial consultation once the company’s specific facts are known.
14. Speak to an ESOP consultant
If you are designing a new ESOP pool, valuing an existing scheme, or preparing ESOP documentation for a funding round or IPO readiness review, a short conversation at the outset usually saves considerable rework later. Consultations of up to 30 minutes are offered at no charge.
CA Murli Chandak – FCA | IBBI-Registered Valuer (Securities or Financial Assets) | IBBI/RV/07/2021/14408
Website: murlichandak.com
Phone: +91 99985 39902
Email: murlichandak@murlichandak.com
Statutory positions verified against source on 7 and 11 August 2026. Field office jurisdictions, SEBI regulations and Income-tax provisions change from time to time; the position applicable to a specific company should be confirmed before filing. This page is general information on ESOP scheme design, valuation and tax compliance in India and is not advice on any specific transaction. Where a matter requires a legal opinion, specialist legal advice should be taken.
Related reading: Registered Valuer in Delhi | ESOP Advisory Services | Startup Solutions | Company Valuation Services | CFO Services | About
