Section 191(2) — the law in short
What the courts have decided on section 191(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
-
Statutory position — s.192(1C), s.191(2) and s.156(2): the eligible start-up ESOP deferral, its three triggers, the fourteen-day period, and the fact that it defers the employee's own tax too
CBDT Circulars & InstructionsCuts both ways
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.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.