My client works for a start-up and has exercised his options. He has no cash and the shares cannot be sold. Is there any deferral, and does it cover his own tax or only his employer's TDS?
This is stage one — the perquisite on exercise — and yes, there is a deferral, but only where the employer is an eligible start-up referred to in s.80-IAC. It covers BOTH sides. Section 192(1C) defers the employer's obligation to deduct or pay tax on the perquisite, and s.191(2) defers the employee's own obligation to pay income-tax on it directly, in identical terms; s.156(2) defers payment of the tax or interest included in a notice of demand on the same income. In every one of the three, the tax must be paid within FOURTEEN DAYS of the EARLIEST of three events: the expiry of forty-eight months from the end of the relevant assessment year; the date of sale of the specified security or sweat equity share; and the date the employee ceases to be the employee. All three sub-sections apply to income of an assessment year beginning on or after 1 April 2021, and all three were inserted by the Finance Act, 2020, which came into force on 1 April 2020.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text), reported as Section 192(1C) as printed on incometaxindia.gov.in/w/section-192-64, Year stamp 2024 (No. 2); s.191(2) on /w/section-191-64, Year stamp 2024 (No. 2); s.156(2) on /w/section-156-64, Year stamp 2025; each corroborated against sections 73, 72 and 71 of the Finance Act, 2020, with commencement under section 1(2)(a) of that Act. It bears on section 192(1C), section 191(2), section 156(2), section 192, section 191, section 156, section 17(2)(vi), section 80-IAC of the Income Tax Act 1961, in Salary & Perquisites, TDS Defaults, Demand, Recovery & Stay and Deductions & Disallowances matters.
A deferral that covered only the employer's withholding would be no relief at all: the employee would still have to pay the tax on his own return. Parliament dealt with that by enacting the same three triggers three times over — in s.192(1C) for the deduction, in s.191(2) for direct payment by the employee, and in s.156(2) for the demand. Read the triggers carefully. The forty-eight months run from the END OF THE RELEVANT ASSESSMENT YEAR, not from the date of exercise, so an exercise in financial year 2026-27 (assessment year 2027-28) buys the employee until fourteen days after 31 March 2032 on that limb alone. But the limb that usually bites first is the third: the moment the employee LEAVES, the clock stops and fourteen days is all he has, whether or not he has sold anything and whether or not there is any market for the shares. A sale is the second trigger and is the one that produces the cash. Note also that s.192(1C) fixes the RATES: tax is computed on the basis of the rates in force for the financial year in which the specified security or sweat equity share was allotted or transferred, not the rates of the year the deferred tax finally falls due. The gateway condition is that the employer is an "eligible start-up referred to in section 80-IAC" — the whole relief fails if that is not made out, and the s.80-IAC conditions must be checked separately.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 192(1C) reads: "For the purposes of deducting or paying tax under sub-section (1) or sub-section (1A), as the case may be, a person, being an eligible start-up referred to in section 80-IAC, responsible for paying any income to the assessee being perquisite of the nature specified in sub-clause (vi) of clause (2) of section 17 in any previous year relevant to the assessment year, beginning on or after the 1st day of April, 2021, shall deduct or pay, as the case may be, tax on such income within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the person, whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred." Section 191(2) reads: "For the purposes of paying income-tax directly by the assessee under sub-section (1), if the income of the assessee in any assessment year, beginning on or after the 1st day of April, 2021, includes income of the nature specified in clause (vi) of sub-section (2) of section 17 and such specified security or sweat equity shares referred to in the said clause are allotted or transferred directly or indirectly by the current employer, being an eligible start-up referred to in section 80-IAC, the income-tax on such income shall be payable by the assessee within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the employer who allotted or transferred him such specified security or sweat equity share, whichever is the earliest." Section 156(2) is in the same terms as s.191(2), save that what is deferred is "the tax or interest on such income included in the notice of demand referred to in sub-section (1)". Section 71 of the Finance Act, 2020 renumbered section 156 as sub-section (1) and inserted sub-section (2); section 72 did the same for section 191; section 73 inserted sub-section (1C) after s.192(1B). Section 1(2)(a) of that Act provides that "sections 2 to 104 shall come into force on the 1st day of April, 2020".
Not a judgment. The statutory position is that where an eligible start-up referred to in s.80-IAC allots or transfers a specified security or sweat equity share to its employee, and the perquisite falls in a previous year relevant to an assessment year beginning on or after 1 April 2021, the employer's deduction or payment of tax under s.192, the employee's own direct payment of income-tax under s.191, and payment of the tax or interest on that income included in a notice of demand under s.156 are each deferred to a date fourteen days after the earliest of (i) the expiry of forty-eight months from the end of the relevant assessment year, (ii) the sale of the security or share, and (iii) the employee ceasing to be an employee; and that the tax is computed at the rates in force for the financial year of allotment or transfer.
Not a judgment; no judicial reasoning is stated for these provisions.
shall deduct or pay, as the case may be, tax on such income within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the person, whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred.
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Handle my notice → Ask a CA on WhatsAppThis is stage one — the perquisite on exercise — and yes, there is a deferral, but only where the employer is an eligible start-up referred to in s.80-IAC. It covers BOTH sides. Section 192(1C) defers the employer's obligation to deduct or pay tax on the perquisite, and s.191(2) defers the employee's own obligation to pay income-tax on it directly, in identical terms; s.156(2) defers payment of the tax or interest included in a notice of demand on the same income. In every one of the three, the tax must be paid within FOURTEEN DAYS of the EARLIEST of three events: the expiry of forty-eight months from the end of the relevant assessment year; the date of sale of the specified security or sweat equity share; and the date the employee ceases to be the employee. All three sub-sections apply to income of an assessment year beginning on or after 1 April 2021, and all three were inserted by the Finance Act, 2020, which came into force on 1 April 2020. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 192(1C), section 191(2), section 156(2), section 192, section 191, section 156, section 17(2)(vi), section 80-IAC of the Income Tax Act 1961. It is reported as Section 192(1C) as printed on incometaxindia.gov.in/w/section-192-64, Year stamp 2024 (No. 2); s.191(2) on /w/section-191-64, Year stamp 2024 (No. 2); s.156(2) on /w/section-156-64, Year stamp 2025; each corroborated against sections 73, 72 and 71 of the Finance Act, 2020, with commencement under section 1(2)(a) of that Act. A deferral that covered only the employer's withholding would be no relief at all: the employee would still have to pay the tax on his own return. Parliament dealt with that by enacting the same three triggers three times over — in s.192(1C) for the deduction, in s.191(2) for direct payment by the employee, and in s.156(2) for the demand. Read the triggers carefully. The forty-eight months run from the END OF THE RELEVANT ASSESSMENT YEAR, not from the date of exercise, so an exercise in financial year 2026-27 (assessment year 2027-28) buys the employee until fourteen days after 31 March 2032 on that limb alone. But the limb that usually bites first is the third: the moment the employee LEAVES, the clock stops and fourteen days is all he has, whether or not he has sold anything and whether or not there is any market for the shares. A sale is the second trigger and is the one that produces the cash. Note also that s.192(1C) fixes the RATES: tax is computed on the basis of the rates in force for the financial year in which the specified security or sweat equity share was allotted or transferred, not the rates of the year the deferred tax finally falls due. The gateway condition is that the employer is an "eligible start-up referred to in section 80-IAC" — the whole relief fails if that is not made out, and the s.80-IAC conditions must be checked separately. If it applies to you, the first step is this: Confirm first, in writing, that the employer is an eligible start-up referred to in s.80-IAC. Nothing else in these provisions works without it, and the library's separate entry on s.80-IAC sets out that section's conditions.
Section 192(1C) reads: "For the purposes of deducting or paying tax under sub-section (1) or sub-section (1A), as the case may be, a person, being an eligible start-up referred to in section 80-IAC, responsible for paying any income to the assessee being perquisite of the nature specified in sub-clause (vi) of clause (2) of section 17 in any previous year relevant to the assessment year, beginning on or after the 1st day of April, 2021, shall deduct or pay, as the case may be, tax on such income within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the person, whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred." Section 191(2) reads: "For the purposes of paying income-tax directly by the assessee under sub-section (1), if the income of the assessee in any assessment year, beginning on or after the 1st day of April, 2021, includes income of the nature specified in clause (vi) of sub-section (2) of section 17 and such specified security or sweat equity shares referred to in the said clause are allotted or transferred directly or indirectly by the current employer, being an eligible start-up referred to in section 80-IAC, the income-tax on such income shall be payable by the assessee within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the employer who allotted or transferred him such specified security or sweat equity share, whichever is the earliest." Section 156(2) is in the same terms as s.191(2), save that what is deferred is "the tax or interest on such income included in the notice of demand referred to in sub-section (1)". Section 71 of the Finance Act, 2020 renumbered section 156 as sub-section (1) and inserted sub-section (2); section 72 did the same for section 191; section 73 inserted sub-section (1C) after s.192(1B). Section 1(2)(a) of that Act provides that "sections 2 to 104 shall come into force on the 1st day of April, 2020". It was decided by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that where an eligible start-up referred to in s.80-IAC allots or transfers a specified security or sweat equity share to its employee, and the perquisite falls in a previous year relevant to an assessment year beginning on or after 1 April 2021, the employer's deduction or payment of tax under s.192, the employee's own direct payment of income-tax under s.191, and payment of the tax or interest on that income included in a notice of demand under s.156 are each deferred to a date fourteen days after the earliest of (i) the expiry of forty-eight months from the end of the relevant assessment year, (ii) the sale of the security or share, and (iii) the employee ceasing to be an employee; and that the tax is computed at the rates in force for the financial year of allotment or transfer.
Not a judgment; no judicial reasoning is stated for these provisions. In the words reproduced by the source cited on this page: "shall deduct or pay, as the case may be, tax on such income within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the person, whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred."
It was decided by the CBDT Circulars & Instructions and is reported as Section 192(1C) as printed on incometaxindia.gov.in/w/section-192-64, Year stamp 2024 (No. 2); s.191(2) on /w/section-191-64, Year stamp 2024 (No. 2); s.156(2) on /w/section-156-64, Year stamp 2025; each corroborated against sections 73, 72 and 71 of the Finance Act, 2020, with commencement under section 1(2)(a) of that Act. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 192(1C), section 191(2), section 156(2), section 192, section 191, section 156, section 17(2)(vi), section 80-IAC, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not a judgment. The statutory position is that where an eligible start-up referred to in s.80-IAC allots or transfers a specified security or sweat equity share to its employee, and the perquisite falls in a previous year relevant to an assessment year beginning on or after 1 April 2021, the employer's deduction or payment of tax under s.192, the employee's own direct payment of income-tax under s.191, and payment of the tax or interest on that income included in a notice of demand under s.156 are each deferred to a date fourteen days after the earliest of (i) the expiry of forty-eight months from the end of the relevant assessment year, (ii) the sale of the security or share, and (iii) the employee ceasing to be an employee; and that the tax is computed at the rates in force for the financial year of allotment or transfer. It arises in Salary & Perquisites, TDS Defaults, Demand, Recovery & Stay and Deductions & Disallowances matters, on section 192(1C), section 191(2), section 156(2), section 192, section 191, section 156, section 17(2)(vi), section 80-IAC of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Diary all three trigger dates the moment the option is exercised: forty-eight months from the end of the relevant assessment year; any sale date; and the date of leaving. Take the earliest and count fourteen days from it. Treat resignation as the live risk. Advise the employee that leaving crystallises the tax within fourteen days even if the shares are unsold and unsaleable, and plan the exit around that. Compute the tax at the rates in force for the financial year in which the shares were ALLOTTED OR TRANSFERRED, as s.192(1C) directs, and keep the working with the file. If a notice of demand has been served that includes tax or interest on this perquisite, check s.156(2) before paying: the demand itself is deferred on the same three triggers. If the employer is NOT an eligible start-up, none of this applies. The perquisite is deductible under s.192 in the ordinary way in the year of exercise and the employee must find the cash.
Still good law. Each sub-section was read on a departmental page that named the Income-tax Act, 1961, printed the correct section heading and carried a Year stamp (2024 (No. 2) for ss.191 and 192, 2025 for s.156), and each was corroborated word for word against the enacting section of the Finance Act, 2020. The commencement date of 1 April 2020 is taken from section 1(2)(a) of that Act, read directly. The only later amendment traced is the substitution in s.192(1C) of "sub-clause (vi) of clause (2)" for "clause (vi) of sub-section (2)" by Act No. 15 of 2024 with effect from 1 October 2024, which does not change the operation of the sub-section. No judicial decision construing any of the three sub-sections was located, and no search for later treatment beyond that was carried out. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
All three sub-sections were read twice, on independent routes. Section 192(1C) was transcribed as a continuous run of sub-sections (1B), (1C) and (2) from the departmental page /w/section-192-64, Year stamp 2024 (No. 2); the whole of s.191 from /w/section-191-64, Year stamp 2024 (No. 2); and the whole of s.156 from /w/section-156-64, Year stamp 2025. Each was then read again in the enacting provision itself — sections 73, 72 and 71 respectively of the Finance Act, 2020 — and the texts match. Section 1(2)(a) of the Finance Act, 2020 provides that sections 2 to 104 come into force on 1 April 2020, which covers all three. ONE TEXTUAL ODDITY the reader should know about. The departmental s.192 page carries footnote [80]: the words "clause (vi) of sub-section (2)" in s.192(1C) were SUBSTITUTED by "sub-clause (vi) of clause (2)" by Act No. 15 of 2024 with effect from 1 October 2024 — a correction of the way s.17(2)(vi) is described. That correction was NOT made to s.191(2) or to s.156(2), both of which still read "clause (vi) of sub-section (2) of section 17". Nothing turns on it, because both descriptions point to the same provision, but a reader comparing the three will notice the difference. The bare URLs /w/section-192 and /w/section-191 both serve section 192 and section 191 of the BHARATIYA NAGARIK SURAKSHA SANHITA, 2023 and must not be used. I did NOT re-verify the conditions of s.80-IAC on this pass and state none of them here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not a judgment. The statutory position is that where an eligible start-up referred to in s.80-IAC allots or transfers a specified security or sweat equity share to its employee, and the perquisite falls in a previous year relevant to an assessment year beginning on or after 1 April 2021, the employer's deduction or payment of tax under s.192, the employee's own direct payment of income-tax under s.191, and payment of the tax or interest on that income included in a notice of demand under s.156 are each deferred to a date fourteen days after the earliest of (i) the expiry of forty-eight months from the end of the relevant assessment year, (ii) the sale of the security or share, and (iii) the employee ceasing to be an employee; and that the tax is computed at the rates in force for the financial year of allotment or transfer.
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