Employee Stock Option Plan (ESOP) Scheme Format
Draft a full ESOP scheme for an unlisted private or public company, from the option pool and vesting to leavers, exits and tax.
Law version: Up to FY 2025-26 (Income-tax Act, 1961); Tax Year 2026-27 onwards (Income-tax Act, 2025). Checked on 26 Sep 2026.
What it is
An employee stock option gives an employee the right to buy shares of the company at a fixed price after a vesting period. An unlisted company issues ESOPs under Section 62(1)(b) of the Companies Act, 2013 and Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, after the members approve the scheme by special resolution. The scheme document sets out who is eligible, the size of the pool, the vesting schedule, the exercise price and period, what happens when an employee leaves or the company is sold, and how tax is dealt with.
When it is used
- Start-ups and private companies using equity to attract and retain staff.
- Formalising options promised in offer letters.
- Before an investment round, when investors ask for a defined ESOP pool.
What the template covers
- Name, purpose and administration of the plan
- Eligible employees and exclusions
- Option pool and limit per employee
- Grant, vesting schedule and cliff
- Exercise price, exercise period and method
- Leavers, death and incapacity
- Change of control, tax, register (SH-6) and disclosures
Details you will need
The generator asks for the following. Fields marked with an asterisk in the form are required; the rest can be left blank and filled in later in Word.
Company
Company Name; CIN; Registered Office; Type of Company; Is it a small company?; DPIIT-recognised start-up?; Date of Incorporation; Equity Shares Issued (number); Face Value per Share (₹)
Plan
Name of the Plan; Date of Board Approval; Date of Members' Special Resolution; Place; Plan Administered by; Total Options in the Pool; Maximum Options per Employee (optional); Eligible Employees; Include employees of holding / subsidiary companies?
Vesting and Exercise
Total Vesting Period (months); Cliff (months); Vesting after the Cliff; Exercise Price; Fixed Exercise Price per Share (₹); Exercise Period after Vesting (years); Days to Exercise after Resignation; Lock-in after Allotment (months, optional); On a Change of Control; Courts with Jurisdiction (city)
Authentication
Signed by (Name); Designation; DIN / Membership No.
Stamp duty, registration and filing
Rule 12 requires a minimum vesting period of one year and approval by special resolution, with the disclosures listed in Rule 12(2) in the explanatory statement. Promoters and directors holding more than 10% are excluded, except in DPIIT-recognised start-ups for the period allowed by the Rules. The company keeps a register in Form SH-6. On exercise, the difference between fair market value and the exercise price is a taxable perquisite with TDS by the employer (Sections 17(2) and 192 up to 31 March 2026; Sections 17 and 392 of the Income-tax Act, 2025 from 1 April 2026). Listed companies follow SEBI regulations instead.
The tax clause cites Sections 17(2) and 192 of the Income-tax Act, 1961 for plans approved up to 31 March 2026, and Sections 17 and 392 of the Income-tax Act, 2025 from 1 April 2026. Listed companies must use the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 instead.
Generate the Employee Stock Option Plan (ESOP Scheme Document)
Fill in the form and download the draft as a Word file. It is a general template, not legal or professional advice; have it reviewed for your facts before you sign or rely on it.
Need this checked against your facts, or the registration or filing that follows (e.g. the MCA e-form filing)? Contact SKAG and Associates
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Frequently asked questions
What is the minimum vesting period for ESOPs?
One year from the date of grant, under Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014.
Can founders get ESOPs?
Generally not if they are promoters or directors holding more than 10%. DPIIT-recognised start-ups have a relaxation for a limited period after incorporation.
When is tax payable on ESOPs?
When the employee exercises the option (as a perquisite) and again when the shares are sold (as capital gains). Eligible start-ups can defer the TDS on the perquisite subject to conditions.
This page gives general information for reference only. Laws, stamp duty rates and filing requirements change and differ between States, so confirm the current position for your case. Related: all document templates · free tax calculators · compliance calendar and guides.