By rule, not by negotiation. For a share listed in India the value comes from a formula applied to that day's trading on the exchange with the highest volume. For an unlisted share it comes from a registered merchant banker's valuation certificate. Neither method asks what a buyer would actually pay you.

The nearest preceding date on which the share did trade is used instead. This matters for thinly traded shares, where the reference price can be days old and quite different from the screen price on the day you exercised.

The company, not you. It obtains a certificate from a registered merchant banker, and that certificate has a limited validity window. Exercises are sometimes delayed because the current certificate has expired and a new one is being arranged — worth knowing if you are working against a deadline.

Not in any practical sense. The method is prescribed and the employer applies it. Where you believe the certificate value is unrealistic, the conversation is with the company before the valuation is commissioned, not with the tax authority afterwards.

Because the benefit is the gap between what the shares are worth and what you paid, and employment law treats that gap as compensation. No cash came to you, but value did. It is the same principle as any non-cash benefit from an employer, applied to something that can be very large.

No. Selling immediately gives you cash to pay the tax, which is useful, but the perquisite arose at exercise and is taxed as salary regardless. You still have two tax events — the perquisite, and a capital gain that happens to be near nil.

Because the tax on a large perquisite is recovered through payroll, and where the perquisite is big relative to monthly pay it can absorb the entire amount. Ask payroll how they intend to recover it before exercising. Some spread it across remaining months, some take it in one.

It can. The perquisite is added to your other salary income for the year, so a large exercise can move part of your ordinary earnings into a higher band. The marginal cost of exercising is therefore sometimes higher than the headline rate you assumed.

Not necessarily. The withholding is computed on what the employer knows about your income. Where you have other income — rent, capital gains, a second employment — a balance can remain, payable through advance tax, with interest running if it is not paid on time.

The liability is still yours. Some smaller companies fail to operate withholding correctly on perquisites, and the employee discovers it at filing. Declare the perquisite in your return and pay the tax; the employer's failure does not remove your obligation.

Because it records the value you were taxed on, and that value becomes your cost of acquisition when you eventually sell. Years later, without it, establishing that number is difficult and the burden of proof is yours. Keep the Form 16 for every year in which you exercised.

For options, yes, and it is the only variable you control. The date fixes the valuation, the tax and your cost basis simultaneously. Exercising when the share price is lower reduces the perquisite, though it also means buying in at a lower valuation, so the two effects partly offset. Cash availability is usually the binding constraint rather than optimisation.

The share price and the exchange rate are both fixed on the same date, so two variables move at once. The Indian employer remains responsible for withholding even though the shares are issued abroad, and the holding period for long-term treatment is twenty-four months rather than twelve.

Employees of eligible startups can defer the perquisite under a specific provision, which postpones the tax rather than removing it. The eligibility conditions are narrow and most companies calling themselves startups do not qualify. It is covered on its own page.

Nothing to the perquisite. It was fixed and taxed on the exercise date and does not adjust downward. If you subsequently sell below that value the result is a capital loss, which can be set against capital gains but not against the salary income you were taxed on. This is the harshest feature of the regime and the reason exercising into an illiquid holding carries real risk.

The current fair market value being used, the resulting perquisite, how the tax will be recovered, and whether any facilitated sale exists to fund it. All four are things the company can answer, and knowing them turns the decision into arithmetic rather than a guess.