How to negotiate ESOPs in India: what to ask and what to push for

Yes, you can negotiate ESOPs in India, but mainly on two things: the number of options and how much salary you trade for them. Terms like the exercise price, vesting and the exercise window after you leave follow the company's ESOP scheme, so they are hard to change for one person. Ask about them anyway. They decide what your options are really worth.

Which ESOP terms can you negotiate?

You can usually negotiate the number of options and the salary-equity split. Most other terms follow the ESOP scheme, and senior hires have more room than others.

An ESOP (employee stock option plan) gives you the right to buy company shares later at a fixed price, called the exercise price or strike price. Your options vest, or become yours to exercise, in stages over a few years. Indian law requires at least a year between grant and vesting, so every scheme has a cliff of at least a year in which nothing vests. Your offer usually comes with a grant letter that applies the company's ESOP scheme to you.

Caption: What an employee can usually negotiate in an Indian startup ESOP offer.

Why are most ESOP terms hard to change?

For an unlisted Indian company, ESOPs follow Section 62(1)(b) of the Companies Act, 2013 and Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Rule 12 requires the scheme approved by shareholders to state, among other things:

• the exercise price, or the formula for working it out
• the vesting requirements and the maximum vesting period
• the exercise period and how to exercise
• the time you get to exercise if you resign or your job ends
• the conditions under which vested options lapse
• the maximum number of options per employee

Many schemes set a range rather than a single answer. Swiggy's 2021 plan, for example, allows vesting periods from one to eight years, and Meesho's scheme says only that the exercise price cannot be below face value. The board or its ESOP committee then fixes the actual terms for each grant within those limits.

Changing the scheme itself needs a fresh shareholder resolution, and the change cannot hurt existing option holders. That is why a recruiter usually cannot promise you a different exercise price or exercise window. Indian advisory firm Treelife advises companies not to give one employee terms outside the scheme without fresh approval.

Where to focus your negotiation

Put your energy where there is room: the number of options and the cash-equity split. Senior leaders also have a realistic chance on vesting, on the exercise window and on what happens if the company is sold. ESOP platform Hissa observes that Indian startups are often willing to discuss exercise windows and leaver terms with senior hires.

What should you ask about ESOPs?

Ask for the share count, the exercise price, the latest valuation, the vesting and exit terms, and the company's buyback record. Ask for the answers in writing.

1. What is my cash CTC, without ESOPs? Some offer letters add an estimated ESOP value into CTC. Compare cash with cash first.
2. How many shares are there on a fully diluted basis? Fully diluted means all shares plus every option and convertible that could become a share. It tells you what percentage of the company your grant is.
3. How many shares does each option convert into? One option is not always one share. At Meesho, each option under one of its pools converts into 49 shares.
4. What is the exercise price? Many startups set it at the share's face value, often ₹1 or ₹10. By law it cannot be lower than face value. Ask for a fixed rupee amount in the grant letter.
5. What is the latest fair market value used for tax? For an unlisted company it comes from a valuation by a SEBI-registered Category I merchant banker, the independent valuer the tax rules require. It can be very different from the price investors paid.
6. What is the vesting schedule and cliff? Four years with a one-year cliff is common.
7. How long can I exercise after I leave, and can the board extend it?
8. What happens if I resign, am laid off, or am fired for cause? Ask how the scheme defines good and bad leavers. Some plans treat a voluntary resignation as a bad leaver event.
9. Has the company bought back ESOPs before? Ask how often, at what price, and whether former employees could take part.
10. Does the company qualify for the startup tax deferral? It changes when you pay tax on exercise.

How much ESOP should you ask for?

Ask for your grant as a percentage of fully diluted shares, not just a number of options or a rupee value. A percentage lets you compare offers and see how much new funding rounds dilute you.

These are common Indian ranges for a single new-hire grant at an early-stage startup.

Caption: Grant ranges adapted from Treelife's September 2026 guidance. Later-stage companies grant smaller percentages, often worth more in rupees.

A grant of 1% or more of the company's issued capital to one person in a year needs separate shareholder approval. Very large asks take longer to clear.

How much is your ESOP offer worth?

Your ESOP offer is worth the paper gain on your shares, minus the tax you pay at exercise. It turns into cash only if the company is sold, lists or buys the shares back. Start with a simple formula to get the paper value:

Paper value = number of shares × (fair market value per share − exercise price per share)

Worked example: valuing 4,000 options

Say you are offered 4,000 options, each converting into one share. The exercise price is ₹10 and the latest fair market value is ₹1,500. The numbers are made up to show the method.

• Paper gain per share = ₹1,500 − ₹10 = ₹1,490
• Paper value = 4,000 × ₹1,490 = ₹59.6 lakh
• That vests over four years, so about ₹14.9 lakh a year on paper

Three things reduce that number:

• Tax at exercise. The gain at exercise is taxed as salary. Under the new tax regime, at the 30% slab with cess and any surcharge, tax takes roughly 31% to 39% of the gain.
• Dilution. Each new funding round issues more shares, so your percentage shrinks.
• Liquidation preferences. Investors usually get their money back first when the company is sold. In a weak sale, little may be left for ordinary shareholders, including you.

Tax at exercise and the startup deferral

ESOPs are not taxed when they are granted or when they vest. When you exercise, the difference between the fair market value on that date and your exercise price is taxed as salary, and your employer deducts TDS. When you later sell, any further rise is taxed as capital gains. The Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026, keeps this approach.

Employees of eligible startups can defer the tax on exercise. The employer then deducts it within 14 days of the earliest of these dates:

• 60 months from the end of the tax year in which the shares were allotted
• the date you sell the shares
• the date you leave the company

Only some startups qualify. They need recognition from DPIIT, the government's Department for Promotion of Industry and Internal Trade. They also need a tax-exemption certificate from a government panel called the Inter-Ministerial Board. That is a small group: about 3,700 startups had the certificate by May 2025, against more than 1.6 lakh recognised startups. So ask, do not assume.

Why "₹X crore worth of ESOPs" can mislead

Headlines value ESOPs at the last funding round price. That price is for investors' preference shares, which carry extra rights. The value used for your tax, and what you can actually sell for, is often lower.

• In 2019, Byju's valued its shares for ESOP purposes at ₹50,736, while investors in its July 2019 round paid ₹1,14,910 per share.
• In 2024, Prosus, Byju's largest outside investor, wrote its stake down to zero.
• Unacademy raised over $800 million and was last valued at about $3.4 billion. In December 2025, as it cut the exercise window for former employees, co-founder Gaurav Munjal said:

When liquidation preference is properly enforced, ESOPs effectively become zero. But we didn't want that to happen.

ESOPs can still be a good deal. Value them with care, not with the headline number.

Is an ESOP good or bad for you?

That depends on the quality of the offer as much as the company's prospects. A good ESOP offer has four signs:

• Open numbers. The company shares the fully diluted share count and the latest valuation.
• Fair terms. A reasonable exercise window after you leave, and bad leaver rules kept for misconduct.
• A record of liquidity. Past buybacks or secondary sales show the options can turn into cash before an IPO.
• A realistic route to value. A credible path to a sale, listing or regular buybacks.

ESOPs have made real wealth for Indian employees. When Freshworks listed on Nasdaq in September 2021, its CEO said more than 500 of its employees in India became crorepatis. When Swiggy listed in November 2024, about 5,000 current and former employees held ESOPs worth about ₹9,000 crore at the top of the IPO price band. Both outcomes depended on terms that let people keep and exercise their options.

What happens to ESOPs when you leave?

When you resign or your job ends:

• Unvested options usually lapse.
• Vested options must be exercised within the exercise window in the scheme, or they lapse too.
• If you are fired for cause, many schemes cancel even vested options.
• If an employee dies, Rule 12 says all options granted till then vest in their legal heirs or nominees. If an employee suffers a permanent incapacity, all options granted till then vest on that day.

Exercise windows in India range from a few weeks to many years. Treelife describes 30 to 90 days as common. Some companies are far more generous:

• Meesho's scheme gives up to 10 years from your last working day.
• Swiggy's 2021 plan gives former employees 36 months to exercise vested options, for the period after its listing. Termination for cause cancels even vested options.
• Unacademy cut its window for former employees from up to 10 years to 30 days in December 2025.

The Unacademy case teaches one more lesson. A scheme can be changed later, so ask how existing options were treated the last time the company amended its plan.

If your window is short, ask for an extension before you leave. Treelife notes that boards often agree to an extension for someone leaving on good terms. Get any extension in writing.

Faster vesting if the company is sold

Can you negotiate it? Sometimes, mainly as a senior hire. If the company is acquired, the scheme and the board decide what happens to unvested options. Faster vesting on a sale is called acceleration. Some schemes speed up vesting when the company is sold, others only when the sale is followed by losing your job, and many leave it to the board. If you are joining in a senior role, ask for the treatment in writing.

How do you ask for more ESOPs?

Ask for the facts first, then for a specific trade, such as more options for a little less salary. Keep the tone curious, not combative. A few lines you can use:

• "Could you share the total fully diluted share count, so I can see what percentage this grant represents?"
• "What fair market value did the last valuation use, and when was it done?"
• "Could you send two versions of the offer, one with more cash and one with more equity, so I can compare?"
• "Is there room to increase the grant if I take a slightly lower salary?"
• "How has the board handled exercise windows for people who left on good terms?"
• "Has the company run an ESOP buyback before, and could former employees take part?"

If a company will not share basic numbers like the share count, weigh that when you decide.

What should founders keep flexible?

If you are on the other side of the table, a few choices cost you little and win trust:

• Share the fully diluted share count and the latest valuation openly.
• Write a longer exercise window into the scheme itself, so you do not have to negotiate it person by person.
• Keep bad leaver rules for misconduct or fraud only. Treelife warns that cancelling vested options because someone joins a competitor may not hold up, because Section 27 of the Indian Contract Act limits restraints on trade.
• Run regular buybacks or secondary sales, so employees see that the options are real.

This article is general information, not legal, tax or financial advice. Check your ESOP scheme and grant letter, and speak to a tax adviser before you exercise or sell.