An ESOP scheme with an unmodelled tax exposure worth roughly ₹1 crore, identified and resolved before it became an employee-facing liability.
The situation
A startup's ESOP scheme had been administered without a clear model of the perquisite tax and valuation implications for employees at exercise, creating a latent liability estimated at roughly ₹1 crore across the pool.
The approach
The ESOP scheme was reviewed against current valuation and tax rules, the exercise and vesting mechanics were corrected, and a compliant administration process was put in place going forward.
The outcome
The exposure was identified and resolved before it crystallized into an employee-facing tax liability or a compliance finding.
ESOP structuring and the tax exposure behind it is covered on our Deals & Corporate Finance page.
What made the exposure real
The gap was in Section 17(2) perquisite tax treatment at exercise: without a defensible fair-market-value certification at each vesting event, the tax authority can challenge the valuation used and reassess the perquisite value years later, with interest, against both the company's withholding obligation and the employees' own returns. That's what turned an administrative gap into a modelled exposure of roughly ₹1 crore.
How it was resolved
- Every historical grant re-valued against a defensible FMV methodology at each vesting date, not just the current one.
- Withholding and Form 12BA reporting corrected for any vesting event where the original perquisite value was understated.
- A standing valuation process put in place so every future vesting event gets a contemporaneous FMV certificate, closing the gap for good rather than just for the events already flagged.
A composite, anonymized account built from the kind of engagement Clairvoyis regularly handles, not a case-by-case record of a single named client.