FY 2026-27

Salary, dividend, or shares

A founder usually takes cash as salary or a dividend, and owns the upside in shares or ESOPs. Salary and dividend are both taxed at your slab. The company can generally deduct salary. It cannot deduct a dividend. An ESOP is taxed when you exercise, and again when you sell, unless deferral applies. The rules below are for FY 2026-27. The longer note is the founder and ESOP guide.

Official sources

Income-tax Act, 2025 (CBDT hub). Read the section text before you file. Section numbers on this page are the familiar 1961 Act ones.
Section 115BAC, the new regime used in the salary figures. Slabs on this site: nil to ₹4 lakh, then 5%, 10%, 15%, 20%, 25%, and 30% above ₹24 lakh. Standard deduction on salary is ₹75,000.
Resident benefits (page labelled AY 2026-27). Section 87A rebate up to ₹60,000 if total income is at or under ₹12 lakh in the new regime, with marginal relief above that.
Employee benefits (page labelled AY 2026-27). ESOP perquisite is fair market value on exercise minus what you pay. A Finance Act, 2020 note defers eligible startup perquisite tax to the earliest of 48 months from the end of the relevant assessment year, sale, or the day you stop being an employee. That note does not state a 60-month window.
Section 54GB and the capital-gains exemption note. For an eligible startup, both pages limit the house or plot transfer to 31 March 2022. The holding test on the section page is more than 25% of share capital or voting rights, not 50%. There is no ₹10 crore cap on these pages.
Form 26AS and AIS, where salary TDS and dividend TDS show up.
CBIC for GST. Section 80-IAC does not switch GST off.

Salary, dividend, ESOP

Three ways money leaves the company. The personal slab rate is the same for salary and dividend. The company treatment is not.

payments Salary

Slab, monthly TDS

The company deducts TDS before it pays you. Salary can also pull in PF, ESI, and gratuity. The company generally deducts it as an expense.

₹20 lakh salary

Standard deduction ₹75,000. Taxable income ₹19,25,000. New-regime tax ₹1,85,000 plus 4% cess = ₹1,92,400. About 9.6% of the ₹20 lakh.

account_balance Dividend

Slab, 10% TDS

Taxed at your slab. TDS is 10% when the dividend in the year is above ₹10,000. That ₹10,000 is a TDS threshold, not a tax exemption. The company does not deduct a dividend. It is paid from profit after the company's own tax.

On top of ₹18 lakh salary

₹7 lakh of dividend adds ₹1,69,000 of tax, including cess. It is not a flat 15%.

trending_up ESOP

Two tax points

At exercise, FMV minus the price you pay is a perquisite, taxed at slab. At sale, the gain is sale price minus that FMV. Unlisted shares: slab if you have held them 24 months or less, 12.5% after that. No ₹1.25 lakh exemption on unlisted shares.

Deferral

DPIIT recognition and IMB certification can postpone the perquisite. They do not cancel it. Details are in section 05.

Same personal tax, different company tax

₹18 lakh salary plus ₹7 lakh dividend, new regime, standard deduction ₹75,000, no other income: taxable income ₹24,25,000, tax ₹3,19,800 including cess. ₹25 lakh of salary alone is the same taxable income and the same ₹3,19,800. The dividend does not get a lower slab. What changes is PF and gratuity (they follow salary, not a dividend) and the company's deduction (salary yes, dividend no).

How to split it

There is no statutory ratio. The bands below are planning ranges, not tax brackets. New-regime bands on taxable income are 5% from ₹4 lakh, 10% from ₹8 lakh, 15% from ₹12 lakh, 20% from ₹16 lakh, 25% from ₹20 lakh, and 30% from ₹24 lakh, before cess. A resident with total income at or under ₹12 lakh can have the slab tax wiped out by the Section 87A rebate.

Company stage	Salary	Dividend	ESOP	Why
Pre-revenue / seed	Minimal (₹6-8L)	None	High	Cash is tight. A low exercise price means a smaller perquisite when that tax comes due.
Early revenue	₹12-18L	₹2-5L	Moderate	₹12-18 lakh of salary is not one 20% bracket. After the ₹75,000 standard deduction it crosses 10%, 15%, and 20%. A dividend does not go into PF wages.
Profitable	₹20-30L	₹5-10L	Selective	Above ₹24 lakh of taxable income the slab is 30% before cess. Extra cash taken as dividend is taxed at that same slab. It still does not raise PF or gratuity.
Pre-IPO / exit	₹30L+	If there are retained earnings	Check the holding period	Unlisted shares need more than 24 months after exercise for 12.5% LTCG. A sale in the same year as exercise is short-term, at slab rates.

₹40 lakh, all salary

Salary ₹40,00,000, standard deduction ₹75,000, taxable income ₹39,25,000. New-regime tax ₹7,57,500 plus 4% cess = ₹7,87,800. About 19.7% of the ₹40 lakh. Do not compare that bill with a package that still includes unexercised ESOPs. The ESOP perquisite is not taxed until exercise, or until a deferral trigger.

Section 80-IAC

Section 80-IAC is a deduction for the company, not for you. An eligible startup can deduct 100% of its business income for any 3 consecutive years out of the first 10. Your salary, your ESOP perquisite, and your capital gains stay in your personal return. The checklist matches the founder guide.

Test	What is required
Recognition	DPIIT-recognized, and IMB certified
Entity	Private limited company or LLP, incorporated after 1 April 2016 and before 1 April 2030
Turnover	₹100 crore or less in every year since incorporation
How it was formed	Not by splitting or reconstructing an existing business
Activity	Innovation, a patent, or a high-commercial-value innovation. Not an excluded line (broking, real estate, capital-goods leasing, jewellery, sin goods)

If the company has ₹50 lakh of business profit and 80-IAC covers that year, that ₹50 lakh is deducted. At a 25% company rate, tax on that slice would have been ₹12.5 lakh, before the 4% cess. A second and third year depend on the profit in those years. They are not an automatic extra ₹30 lakh to ₹50 lakh.

Claims that fail

A partnership firm or a proprietorship is the wrong entity. DPIIT recognition without IMB certification is not the full test. Turnover above ₹100 crore in any year since incorporation breaks it. So does an excluded activity, or a business formed by splitting an older one. Getting DPIIT recognition after you incorporate is normal. That, by itself, is not a reason the deduction is refused.

Section 54GB

Do not plan a house sale in FY 2026-27 around Section 54GB. The section page says the exemption does not apply to a transfer after 31 March 2017, and, for an eligible startup, after 31 March 2022. The exemption note gives the same dates. A sale on or after 1 April 2026 is outside both. Section 54EC is a different rule, for specified bonds. The founder guide still shows a window of 12 months before the sale until 24 months after, and it does not mention 31 March 2022.

If you already claimed 54GB on an earlier transfer, these are the conditions on those pages.

Rule	What those pages say
Who	An individual or a Hindu undivided family
What was sold	A long-term residential house or a plot of land
What you buy	Equity shares. An LLP has none. The company is an SME, or an eligible startup as defined for Section 80-IAC. The exemption note's incorporation window for that startup runs from 1 April 2016 to 31 March 2025.
How much, and by when	The net consideration, before the due date of the return under section 139(1). Investing only the gain is not the same thing.
Control	After the subscription, more than 25% of the share capital or more than 25% of the voting rights. Not 50%.
Company	Buys a new asset within one year. Computers and software are excluded, unless the company is an IMB-certified technology startup. The exemption note brings the gain back if computers or software are transferred within 3 years, and if other new assets are transferred within 5 years.
Shares	Sell them within 5 years and the exempt gain is taxed in that year.
Cap	These 54GB pages do not state a ₹10 crore cap.

Why investing only the gain did not zero the tax

The exemption note uses investment in the new asset, times the capital gain, divided by the net consideration. This illustration is not a plan for a sale in FY 2026-27.
House sold for ₹1.5 crore, cost ₹80 lakh. The gain is treated as ₹70 lakh. Selling costs and indexation are ignored.
12.5% of ₹70 lakh is ₹8.75 lakh, before cess, if no exemption applies.
The company invests ₹70 lakh and the net consideration is ₹1.5 crore: exemption = ₹70 lakh × 70/150 = ₹32,66,667. ₹37,33,333 of the gain stays taxable. At 12.5% that is ₹4,66,667, before cess.
The full ₹70 lakh drops out only when the new asset costs at least the net consideration.

ESOP deferral

If the startup is recognized by DPIIT and certified by the Inter-Ministerial Board, the perquisite tax can wait. You do not pay it on the day you exercise. It is due on the earliest of a sale, the day you leave, or the end of the window. The ESOP deferral page has the dates. DPIIT recognition alone is not enough.

Allotment	Window
Before 1 April 2026	48 months from the end of the relevant assessment year
On or after 1 April 2026	60 months from the end of the financial year of exercise
What ends it	Sale of the shares, you leave the company, or the window ends, whichever is first

The employee-benefits note states the 48-month rule. It does not state the 60-month window. For an allotment on or after 1 April 2026, this site follows the deferral page: 60 months from the end of the financial year of exercise.

Deferral postpones the perquisite. It does not replace it with capital gains tax.

Exercise 1,000 shares at ₹10. FMV on that day is ₹200. The perquisite is ₹1,90,000. If your other income is already in the 30% band (taxable income above ₹24 lakh), the marginal tax on that perquisite is ₹57,000 plus 4% cess, which is ₹59,280. Without deferral, that is due in the exercise year. With deferral, nothing is due on the exercise date. The ₹59,280 is due when you sell, leave, or the window ends.

Perquisite (₹200 − ₹10) × 1,000₹1,90,000

Tax now, if deferral applies₹0

Same perquisite later, if already in the 30% band₹59,280

Sell at ₹500 after more than 24 months. Gain (₹500 − ₹200) × 1,000₹3,00,000

Unlisted LTCG at 12.5%, before cess₹37,500

The ₹37,500 is a second tax, on the rise after exercise. It is not a saving against the ₹59,280. Run your own FMV and holding period in the ESOP calculator.

GST

GST is a separate tax from income tax. Section 80-IAC does not cancel it. The usual registration line for services is ₹20 lakh of turnover, and ₹40 lakh for goods. Some states use a lower line. Check CBIC for the state you operate in.

Question	Income tax	GST
When it starts	Personal slabs. New regime: nil rate to ₹4 lakh. Rebate can zero the tax up to ₹12 lakh. Old regime basic exemption is ₹2.5 lakh (below 60).	Usual limits: ₹20 lakh (services), ₹40 lakh (goods)
Return	Annual ITR	GSTR-1 and GSTR-3B, monthly or quarterly
80-IAC	100% deduction of the company's eligible business income, for 3 years	No effect. GST is still charged

80-IAC is not a GST exemption

A services startup over the turnover line still registers for GST. The income-tax deduction does not replace that registration. Failing to register when you had to is its own default under the GST law.

Through the year

Advance tax under Section 211 is 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March. The percentages are cumulative. The dates and the late-payment interest are on the tax calendar.

When	What	Detail
April	Regime and 80-IAC	Old or new regime for your salary. Whether the company still meets the 80-IAC tests. Which ESOP batch, if any, vests this year.
15 June	15%	First instalment. Include salary, dividend, and any ESOP perquisite that is taxable this year (exercise without deferral, or a deferral trigger).
15 September	45%	Cumulative. Revise the estimate if revenue, or a share sale, changed the half year.
15 December	75%	Cumulative. If you might exercise before 31 March, put that perquisite into the estimate unless deferral applies.
Any month	54GB date	A sale in FY 2026-27 is after 31 March 2022, the last date on the department's 54GB pages for an eligible startup. The return due date is not a new window.
15 March	100%	Last instalment. Reconcile salary, dividend, and any triggered ESOP perquisite. GST turnover and the company's books should describe the same sales.

Run the ESOP numbers

Perquisite at exercise, the deferral window, and capital gains on the sale. The calculator uses the same FY 2026-27 rates as this page.

ESOP tax calculator