An ESOP glossary helps Indian founders, CFOs and HR teams distinguish grant, vesting, exercise and share ownership. Most ESOP disputes start with a word that was read two ways. An employee hears “vested” as “owned”. A CFO reads “grant” as “allotment”. An auditor reads “lapse” as “forfeiture”. The glossary below is organised by the question each term answers, so a reader can find the term by the job it does in the plan, not only by its alphabetical position.
The glossary covers key terms that appear in Indian ESOP schemes, grant letters and filings. Elite Valuation advises on ESOP structuring and compliance, grant-date and exercise-date Valuation, and the filings that follow each event. Where a term is a market convention rather than a legal definition, the entry says so, and where a rule applies, the rule is cited. Rules change by notification, so each citation should be checked against the current text before it is relied on.
Key Takeaways
- Grant is the offer, vesting is the earning of the right to exercise, exercise is the employee’s purchase, and allotment is the company issuing the share.
- A cliff delays the first vesting date. A one-year cliff on a four-year grant usually vests 25 percent at month 12, with the balance over the remaining period.
- Rule 12 of the Share Capital Rules requires at least one year between grant and vesting for an unlisted company’s ESOP.
- Perquisite on exercise is taxed as salary; withholding follows the applicable salary rules and any qualifying-startup deferral.
- Lapse and forfeiture are different events. A lapse is the expiry of options on a set date or event, and forfeiture is the loss of unvested options on leaving.
- A cash-settled phantom plan does not issue shares. A stock appreciation right can be cash-settled or share-settled, so approval, filing and accounting consequences depend on its actual settlement terms.
How Should You Read This ESOP Glossary?
Each table gives the term, its meaning in plain language, and the point at which it matters in an Indian ESOP. Some entries are defined in the Companies Act or the tax statute. Others are market terms that the scheme and grant letter must define. The grant letter, the scheme and the board resolution should use the same meaning for each term, and where they do not, the scheme document governs for the company’s internal purposes, subject to the statute.
The ESOP Lifecycle at a Glance
What Do the Grant and Scheme Terms Mean?
These terms describe the plan itself and the act of offering options under it. They decide who is eligible, how many options exist and when the company has made a grant that starts the accounting and disclosure clock.
ESOP scheme and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| ESOP scheme | The plan under which options or shares are offered to employees | Shareholder approval under Section 62(1)(b), Rule 12 and applicable company-specific exemptions; the company secretary should confirm the resolution route |
| Option | A right, not an obligation, to buy one share at a set price after vesting and exercise | An option is not a share. Allotment happens on exercise, and the return of allotment follows then |
| Grant | The board’s act of offering options to a named employee on stated terms | Check the accounting grant-date definition separately from the date a board approves or sends an offer |
| Grant letter | The document that sets the number, exercise price, vesting, exercise window and leaver terms | It must match the scheme and the board resolution. Differences are a common audit query |
Grant date and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Grant date | The date the company and employee have a shared understanding of the award, with required approvals obtained | Measurement date for the grant-date fair value under Ind AS 102 |
| ESOP pool | The total number of options reserved under the scheme | The pool cannot exceed the limit in the special resolution and must fit within authorised capital |
| Pool top-up | An increase in the reserved pool, usually before a funding round | Requires the scheme to allow the increase and changes the fully diluted cap table |
| Fully diluted capital | The share count including all options, convertibles and warrants | The usual base for ESOP percentages and for pricing a round |
| Special resolution | Shareholder approval where votes in favour are at least three times the votes against | Identify whether this resolution is required under the applicable route. Special resolutions are generally filed on MGT-14 within 30 days under Section 117 |
Eligible employee and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Eligible employee | A person permitted to receive options under the scheme | Check promoter/director restrictions and the qualifying-startup exemption, including its ten-year period, against the current rule and shareholding facts |
| Cap table | The record of who holds which shares, options and convertibles | Must reconcile to the register of members, the SH-6 register and the ESOP note |
What Are Vesting, Cliff and the Vesting Conditions?
What Is Vesting?
Vesting is the process by which an employee earns the right to exercise an option. Before vesting, the option is granted but cannot be exercised. Vesting is usually linked to time served, a performance target or both; statutory death or permanent-incapacity rules may override the normal schedule. Vesting does not transfer any share, and the employee does not become a shareholder merely by vesting. The option rights remain governed by the scheme until exercise and allotment. In the Ind AS 102 accounting, the expense is spread over the vesting period.
What Is a Cliff?
A cliff is a minimum period that must pass before any options vest. Nothing vests before the cliff date, and on that date a stated portion vests at once. The remaining options then vest on the schedule in the grant letter. The cliff protects the company from a short-term employee receiving options and leaving soon after.
Illustrative calculation: a one-year cliff on a four-year grant
An employee receives 1,200 options on 1 April 2027, with a four-year vesting period and a one-year cliff. On 1 April 2028, 300 options vest, which is 25 percent. The remaining 900 options vest in 36 monthly instalments of 25 options, completing vesting in April 2031. The figures are chosen for the arithmetic and describe no company.
A cliff is not a minimum vesting period. Rule 12 requires at least one year between grant and vesting for an unlisted company, and a cliff of one year satisfies that requirement. Monthly vesting inside the first year generally fails that minimum unless a permitted exception or adjustment applies. Death, permanent incapacity and qualifying merger adjustments must be checked separately. The grant letter should state both the cliff and the first vesting date, so that the two terms are not confused.
How a One-Year Cliff Works
What Is Graded Vesting?
Graded vesting releases options in tranches, each with its own date. A four-year grant might vest 25 percent each year, or 10 percent, 20 percent, 30 percent and 40 percent in successive years. Under Ind AS 102, service-only tranches with different vesting periods are treated separately, and the expense for each tranche is recognised over its own period. The grant letter should state the tranches, not only the total.
Other Vesting Terms
Vesting period and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Vesting period | The time between grant and the final vesting date | Ind AS 102 spreads the expense over this period. Rule 12 requires at least one year for unlisted companies |
| Vesting schedule | The table of dates and the number of options that vest on each | Used for the quarterly true-up of the Ind AS 102 expense and for the auditor’s tie-out |
| Tranche | A separate block of options with its own vesting date | Each tranche needs its own expense schedule |
| Service condition | A vesting condition met by staying with the company for a period | A non-market condition, so estimated leavers affect the expense |
| Performance condition | A vesting condition tied to a target, such as revenue or a milestone | Performance conditions may be market or non-market. Classify the target before deciding whether it affects fair value or the vesting estimate |
Market condition and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Market condition | A vesting condition tied to the share price or an exit value | Built into the grant-date fair value and not trued up for later changes in the share price |
| Accelerated vesting | Early vesting on a defined event, such as a sale of the company | Single trigger vests on one event, and double trigger needs the event and a termination. The board should approve the terms |
| Single trigger | Acceleration triggered by one event only | Its accounting depends on the original terms, the trigger and whether there is a modification, cancellation or accelerated service period |
| Double trigger | Acceleration triggered by an event and a termination within a set period | Shields the employee if the buyer does not retain the team |
Minimum vesting period and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Minimum vesting period | The shortest period between grant and vesting the rules allow | One year for unlisted companies under Rule 12. For listed companies, the SEBI share-based employee benefits regulations also set a one-year minimum, with exceptions for death or permanent incapacity |
What Do the Exercise and Pricing Terms Mean?
What Is the Exercise Price?
The exercise price is the amount the employee pays to buy one share on exercise. It is set in the grant letter, and it may be the fair market value on the grant date, a value set by the board, or a value set by the scheme. The exercise price is also called the strike price in some documents. It is not the same as the fair market value on the exercise date. The difference between the two is the basis of the perquisite that is taxed as salary.
The scheme and applicable rules determine the exercise price; there is no universal requirement for it to equal or exceed grant-date fair market value. Accounting option value, the employee-perquisite share value and any applicable foreign-investment conditions are separate questions. Document the price and check the route before implementing a non-resident award.
Strike price and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Strike price | Another name for the exercise price | Use one term in the scheme and the grant letter, and do not mix them |
| Exercise period | The window in which vested options can be exercised | Set by the scheme and grant letter. Options not exercised within it lapse |
| Post-termination exercise window | The period after leaving in which a leaver may exercise vested options | Usually shorter for a bad leaver. The window should be stated in the scheme |
| Exercise notice | The employee’s written request to exercise, with payment | The allotment date follows the notice and payment, and starts the PAS-3 clock |
| Cash exercise | Exercise where the employee pays the exercise price in cash | The usual route. The allotment is a cash allotment for PAS-3 purposes |
Cashless exercise and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Cashless exercise | Exercise where the company or a broker sells some shares to pay the exercise price and tax | A broker-assisted sale-to-cover can still fund a cash allotment. Net settlement needs its own legal, tax and filing analysis |
| Net exercise | Exercise where the employee receives fewer shares, with the exercise price settled against the value of the withheld shares | A form of cashless exercise. The withheld shares are not allotted |
| Sell-to-cover | A sale of some shares on exercise to fund the exercise price and tax | Common for listed companies. For unlisted companies, the buyer and the price must be arranged in advance |
| Fair market value | The value of a share determined under a stated method at a stated date | Used for the perquisite and for FEMA pricing. Check the statutory Valuation method for unlisted shares against the current Income-tax rules |
Intrinsic value and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Intrinsic value | The excess, if any, of the underlying share value over the exercise price | The positive difference, floored at zero, is not the option’s full fair value or the Ind AS 102 expense |
| Option lapse | The end of an option without exercise, after its window closes or on a stated event | A lapse does not reverse the expense already booked for an option that vested |
- An employee holds 500 vested options with an exercise price of Rs 100 per share.
- On exercise, the fair market value of each share under the perquisite rules is Rs 260.
- The employee pays Rs 50,000 (500 multiplied by Rs 100) to the company.
- The perquisite is Rs 80,000 (500 multiplied by the Rs 160 gap), and tax is deducted on it as salary.
Exercise Cost Is Not the Taxable Benefit
What Do the Perquisite Tax and TDS Terms Mean?
For current tax years, read the Income-tax Act, 2025 and Income-tax Rules, 2026. Employee perquisites use Section 17(1)(d), read with Section 17(4)(h); salary withholding is addressed by Section 392. Earlier periods require their applicable transition rules.
Perquisite and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Perquisite | The taxable benefit: exercise-stage fair market value less the employee’s payment | A salary benefit; it is not the amount of tax payable |
| Rule 15 fair market value | The share value used for the employee-perquisite computation | Rule 15(6) requires merchant-banker valuation for unlisted equity on a permitted specified date; confirm Category I credentials and the date requirements |
| TDS on salary | The employer’s withholding obligation on salary benefits | Apply Section 392 and the prescribed deposit/reporting timetable, including any applicable deferral; avoid treating every employer/month as having one deadline |
| Startup deferral | A timing concession, not an exemption from the benefit’s tax | Section 392(3), read with Section 289(3), applies to a qualifying employer under Section 140; the trigger is the earliest of the statutory 60-month endpoint, sale or cessation of employment |
Salary-TDS certificate and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Salary-TDS certificate | The employee’s record of salary and withholding | Use the prescribed certificate for the relevant period; the 2026 Rules specify Form 130, rather than blindly retaining a legacy Form 16 label |
| Holding period | The period counted from share allotment/transfer to the employee, not grant | Unlisted equity generally becomes long-term after more than 24 months under Section 2(101); confirm the asset’s classification and any listing change |
| Cost of acquisition | The tax basis for computing a subsequent share-sale gain | Normally the exercise-stage value taken into account for perquisite taxation; do not deduct the exercise price a second time from that basis |
Keep benefit and tax separate. A taxable perquisite of ₹80,000 is not ₹80,000 of tax. The final tax depends on the employee’s applicable salary-tax position. Confirm eligibility, trigger dates and due dates before relying on a startup deferral.
What Do the Ind AS 102 and Valuation Terms Mean?
The accounting for ESOPs is set by Ind AS 102 for share-based payments. The terms below are the ones that appear in the auditor’s testing, the ESOP note and the Valuation report that supports the grant-date fair value.
Ind AS 102 and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Ind AS 102 | The standard for share-based payment transactions | Governs the expense for ESOPs of companies that apply Ind AS |
| Equity-settled award | An award settled by issuing the company’s own shares | Measured at grant-date fair value and not remeasured afterwards, subject to the vesting estimate |
| Cash-settled award | An award settled in cash, such as a phantom or stock appreciation right | Remeasured at each reporting date until settled. No share is issued |
| Grant-date fair value | The fair value of the award at the grant date, used as the base for the expense | Supported by a Valuation of the underlying shares and an option model |
| Vesting period expense | The grant-date fair value spread over the vesting period | Recognised each reporting period, with cumulative catch-up for changes |
Forfeiture estimate and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Forfeiture estimate | The estimated number of options that will not vest because of leavers or unmet non-market conditions | Revised at each reporting date. Lapses after vesting do not reverse the expense |
| True-up | The quarterly or annual adjustment of the expense for changes in the estimate | Booked as a cumulative catch-up in the period of change |
| Option pricing model | A model such as Black-Scholes or a binomial model used to value an option | For unlisted shares, volatility is usually taken from listed peers, and the expected term from the expected exit |
| Modification | A change to the terms of an award, such as a repricing or an extended exercise window | Any incremental fair value at the modification date is recognised over the remaining period |
Valuation and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Valuation | The determination of the fair value or fair market value of a share at a stated date, by a valuer | Identify the accounting, employee-tax or foreign-investment purpose separately; the required professional, method and date can differ |
| Dividend yield | An input to the option model, reflecting the dividends the company expects to pay | Often nil for early-stage companies, and the assumption should be documented |
Keep Valuation Purposes Separate
What Do the Companies Act and FEMA Filing Terms Mean?
Each ESOP event carries a filing or register entry. The terms below name the registers and forms the company and its company secretary track through the life of a scheme.
Section 62(1)(b) and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Section 62(1)(b) | The provision under which a company issues shares to employees under an ESOP scheme | Read with Rule 12 and applicable private-company exemptions; confirm the approval route rather than assuming every company is identical |
| Rule 12, Share Capital Rules | The rules governing ESOP schemes, including vesting, pricing and disclosures | Covers the minimum vesting period, the disclosures in the Board report and the SH-6 register |
| SH-6 register | The register of employee stock options, which records each grant, exercise and lapse | Kept under Rule 12 and reconciled to the ESOP note at year end |
| Board report disclosure | The annual statement of options granted, vested, exercised, lapsed and in force | Required in the Board’s report under the Share Capital Rules. Must reconcile to the note and the register |
| MGT-14 | The form for filing a special resolution with the Registrar | Filed within 30 days of the resolution under Section 117 |
PAS-3 and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| PAS-3 | The return of allotment, filed after shares are allotted on exercise | Ordinary ESOP allotments generally use the applicable 30-day return period; do not confuse this with a different allotment route’s statutory timetable. Confirm the route with the company secretary |
| FC-GPR | The FEMA report on the issue of shares to a non-resident, filed on allotment | Where applicable, report the non-resident share issue after allotment. Form ESOP separately addresses the option-grant stage; confirm each event and deadline |
| NDI Rules 2019 | The FEMA framework for issuing shares and options to non-resident employees | Check permitted recipients, sector conditions, approvals and applicable pricing/reporting treatment; do not assume a fresh ordinary-investment valuation is always required at every ESOP event |
| Sweat equity | Shares issued to employees or directors for know-how or value addition, not options | Governed by Section 54 and needs a registered valuer’s certificate. Not an ESOP grant |
SEBI share-based employee benefits and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| SEBI share-based employee benefits | The regulations that apply to schemes of listed companies | The SEBI regulations of 2021, which apply alongside the Companies Act for listed companies |
What Are the Leaver, Lapse and Exit Terms?
Leaver terms decide what happens to unvested and vested options when an employee leaves, and exit terms decide what happens to shares when the company is sold, listed or wound up. Both sets of terms are defined in the scheme and the grant letter, and they drive the forfeiture estimate and the cash flows.
Good leaver and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Good leaver | A leaver whose departure is on agreed terms, such as retirement, redundancy or death | Treatment follows the scheme and applicable rules; death and permanent incapacity can have mandatory vesting consequences |
| Bad leaver | A leaver dismissed for cause or who leaves in breach of covenant | Usually loses unvested options and has a shorter window for vested ones |
| Forfeiture | The loss of unvested options on leaving, under the scheme’s terms | Adjust service/non-market vesting estimates under Ind AS 102; do not treat every cancellation as a forfeiture |
| Lapse | The expiry of an option that was not exercised within its window | Different from forfeiture, which happens on leaving before vesting |
| Malus | A right to reduce or cancel unvested awards on stated grounds, such as misconduct or a restatement | Must be set out in the scheme. Its effect on the accounting depends on the terms |
Clawback and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Clawback | A right to recover value already paid or realised from an award | Requires express terms in the scheme and the grant letter |
| Liquidity event | A sale, listing or other event that gives shareholders a route to cash | The scheme should state how options are treated on the event |
| Change of control | A change in who controls the company | A common trigger for acceleration or for cash settlement of options |
| Right of first refusal | A right of existing shareholders to buy shares offered for sale before outsiders | Applies to shares allotted on exercise where the articles provide it |
| Tag-along and drag-along | Rights to join a sale on the same terms, and to require others to sell on a sale of the company | The rights should cover the shares arising on exercise, and the articles should say so |
Phantom stock and Related Terms
| Term | Meaning | Where it matters in India |
|---|---|---|
| Phantom stock | A cash-settled right that pays an amount linked to the share value, without issuing shares | Does not require a Section 62(1)(b) allotment, and is accounted for as a cash-settled award |
| Stock appreciation right | A right to receive the increase in the share value over a set base, paid in cash or shares | Cash-settled if paid in cash. Its treatment depends on how it is settled |
| Restricted stock unit | A right to receive a share or its cash value on vesting, with no exercise price | An award with nil exercise price. Its tax and accounting treatment should be checked against the settlement method |
Setting Up a Scheme or Reviewing Its Terms?
We check the grant letter, the scheme and the board resolution against each other, and prepare the Ind AS 102 schedule and the Valuation that the grant needs.
Talk to Our ESOP Team →Where ESOP Terms Get Confused: Common Mistakes
Treating a grant as an allotment
The employee expects ownership that the scheme does not give, and the company files returns for an event that has not happened.
State in the grant letter that an option is not a share. Start the allotment filings on the allotment date after exercise.
Reading the cliff as the vesting start
The Ind AS 102 expense is understated for the cliff period, and the true-up at year end is larger than the auditor expects.
Spread the expense from the grant date over the full vesting period, and document the cliff and the schedule in the expense workings.
Using the exercise price as the tax value
The perquisite and the TDS are understated, and the employee receives a notice on the difference.
Compute the perquisite as fair market value on the exercise date under Rule 3, less the exercise price paid, and deduct TDS in the month of exercise.
Confusing lapse with forfeiture
The employee loses vested options that the scheme allowed them to keep, and the forfeiture estimate in the expense is wrong.
Use forfeiture for unvested options on leaving, and lapse only for vested options that expire unexercised. Record each event in the SH-6 register with its reason.
Calling a phantom plan an ESOP for all purposes
Approvals and filings are sought that do not apply, while the cash-settled liability is not remeasured in the accounts.
Classify the plan by its settlement. Cash-settled plans are remeasured under Ind AS 102 and do not themselves allot shares. For share-settled plans, determine the applicable company-law route; not every share-linked award automatically follows the same approval route.
Mixing the fair market value terms
One Valuation figure is pushed into three places where a different measure applies, and each filing is exposed to a query.
Label each value by its purpose in the file: Ind AS fair value, perquisite fair market value, and FEMA pricing value. Keep one Valuation report per purpose and cross-refer them.
Frequently Asked Questions: ESOP Glossary India
What is the difference between grant and vesting in an ESOP?
A grant is the company’s offer of options to an employee on stated terms, and it starts the accounting and disclosure clock. Vesting is the process by which the employee earns the right to exercise those options, usually over time or against a condition. A granted option can be unvested, and an unvested option cannot be exercised. The shares are allotted only when the vested option is exercised and the company issues the share.
What is a cliff in ESOP vesting?
A cliff is a minimum period that must pass before any options vest. On the cliff date, a stated portion vests at once, and the rest vest on the schedule in the grant letter. A one-year cliff on a four-year grant commonly vests 25 percent at month 12. The cliff is a term of the grant, and it should not be confused with the minimum vesting period under Rule 12.
What is the exercise price of an ESOP?
The exercise price is the amount the employee pays to buy one share when exercising a vested option. It is set by the approved scheme and grant terms, with the applicable accounting requirements; it need not equal the grant-date share value. It is not the fair market value on the exercise date. The difference between the exercise date value and the exercise price is the perquisite taxed as salary.
What is the minimum vesting period for an unlisted company’s ESOP?
Rule 12 of the Share Capital Rules requires at least one year between the grant of options and their vesting for an unlisted company, subject to applicable exceptions. Listed companies are subject to the minimum vesting period in the SEBI share-based employee benefits regulations, which also has an exception for death or permanent incapacity. The grant letter should state the first vesting date so that the rule is met on its face.
What is the difference between lapse and forfeiture?
Forfeiture is the loss of unvested options when an employee leaves, under the scheme’s leaver terms. A lapse is the expiry of options that were vested but not exercised within their window. Service and non-market vesting failures can adjust expense; market conditions and cancellations require different treatment. A lapse after vesting does not reverse the expense already booked. The two events are recorded separately in the SH-6 register.
What is a good leaver and a bad leaver?
These are scheme-defined departure categories, not universal statutory definitions. They can affect vesting and the exercise window, but mandatory legal protections override inconsistent terms. In particular, check the rules for death or permanent incapacity instead of treating either as a purely discretionary good-leaver concession.
What is perquisite tax on an ESOP exercise?
The benefit is the exercise-stage fair market value less the employee’s payment, taxed as salary. It is not the tax amount itself. Current references are Section 17 and Section 392 of the Income-tax Act, 2025 and Rule 15 of the 2026 Rules. Eligible-startup deferral is conditional, with an earliest-event trigger; it is not available merely because an employer calls itself a startup.
What is cashless exercise and net exercise?
A cashless exercise lets the employee exercise without paying the exercise price in cash, usually by selling some of the shares or by having the company withhold shares equal to the exercise price and tax. In net exercise, the employee receives fewer shares and no shares are allotted for the withheld part. A sale-to-cover may fund a cash allotment; net settlement is different. Confirm company-law permissibility, employee tax, settlement mechanics and filings before using either structure.
Is a phantom stock plan an ESOP under the Companies Act?
A phantom stock plan pays a cash amount linked to the share value and issues no shares. It does not need a Section 62(1)(b) allotment or the share filings that follow an ESOP exercise. It is accounted for as a cash-settled award under Ind AS 102, with the liability remeasured at each reporting date. The plan’s documents should describe the settlement clearly, because the approval route depends on it.
What is the Ind AS 102 expense for an ESOP?
The Ind AS 102 expense is the grant-date fair value of an equity-settled option, spread over the vesting period and adjusted each reporting date for the number of options expected to vest. The grant-date fair value is measured with an option pricing model, using inputs such as the fair value of the share, volatility, the expected term and the dividend yield. The expense is not reversed for lapses that occur after vesting.
Closing Summary: A Glossary Is a Control, Not a Formality
An ESOP glossary is a control over the plan’s language. The same word appears in the scheme, the grant letter, the payroll file, the Board report and the auditor’s workpapers, and each use must carry the same meaning. Grant, vesting, cliff, exercise price, perquisite and forfeiture are the terms that most often drive a query, and each has a rule behind it. A company that defines its terms in the scheme, reads them the same way across its records, and checks the rule where a term carries a filing or tax consequence will answer employee questions and auditor queries from one set of definitions.
Sources
- MCA — Companies Act and applicable rules/exemptions.
- Income-tax Act, 2025, as amended by Finance Act 2026.
- Notified Income-tax Rules, 2026: Rule 15 and current certificate requirements.
- RBI — reporting under FEMA: distinguish option-grant and share-issue events.
- ICAI — Indian Accounting Standards compendium: consult the applicable Ind AS 102 text.
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Disclaimer. General information only, not legal, tax, accounting or investment advice for a particular scheme. Rules and forms change; confirm the company, instrument and transaction-date requirements with the appropriate professionals. Selected editorial review: 2 November 2026.
