ESOP perquisite taxation for start-ups uses deferred TDS and fair market value rules for listed and unlisted shares. Tax on ESOP benefits of eligible start-ups is treated as salary perquisite under section 17(1)(d), but the start-up may deduct or pay tax later under the deferred payment mechanism. The taxable value is the fair market value of the specified security or sweat equity shares on the date of exercise, less the amount paid by the employee. For listed shares, fair market value is determined by opening and closing prices on the relevant exchange, while unlisted shares and non-equity specified securities are valued by a merchant banker on the specified date.