Under the Income-tax Act, 2025 (effective 1 April 2026), the perquisite-tax deferral window for eligible startup employees on ESOPs is extended from 48 to 60 months, now governed by Section 392(3) read with Section 289(3) (replacing old Section 192(1C)). The benefit requires both DPIIT recognition and separate Inter-Ministerial Board (IMB) certification under Section 140 - a step fewer than 2% of DPIIT-recognised startups actually hold.
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New Income Tax Act 2025 extends startup ESOP tax deferral from 48 to 60 months
Why this matters for founders
Founders using ESOPs to attract talent can let employees defer upfront tax up to 5 years, easing a major joining hurdle - but only if the startup secures IMB certification, not just DPIIT recognition, so file for IMB approval now.
Source: CAclubindia
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