- +91 80768 85539
- info@expertvuw.com
- Pan-India service available.
Home / Company Law & Secretarial Services / Phantom Stock Plan
Last updated: 2 October 2026
Phantom stock gives employees a cash reward linked to the value of the company’s shares — without issuing any shares. Our team designs the plan, drafts the documents and sets up the approvals and records.
A phantom stock plan (or cash-settled stock appreciation right) promises employees a cash payment based on the value — or the increase in value — of a notional number of shares. No shares are issued, so the cap table and shareholders’ holdings do not change.
Phantom plans suit companies that want to share value without dilution, or where issuing shares to certain employees is not practical.
Based on the Companies Act, 2013 and the Income-tax Act, 2025. Plan terms depend on your company’s situation. Last updated: 27 September 2026.
Employees receive cash, not shares
Cap table stays unchanged
Payout is taxed as salary for the employee
Company deducts tax at payout
ESOP rules do not apply to phantom plans
Value set by the method in the plan
Unclear terms create disputes at payout time.
No agreed method for valuing the units at payout.
Unclear what happens on exit, resignation or change of control.
Payout obligations not provided for, straining cash flow.
Compare phantom stock with share-based plans.
Share-based options.
Trust-administered pool.
Employee policies.
Valuation support.
Units, vesting, valuation and payout terms agreed.
Plan document and award letters drafted.
Board approval, and shareholder approval where advisable.
Award letters issued to employees.
Register of awards maintained.
Payout calculated and paid with TDS.
Plan the cash and tax side before payout events arrive.
Payout taxed as salary at slab rates.
Company deducts TDS when paying out.
Liability recognised over the vesting period.
Reserve funds for expected payouts.
Share your query and our team will reply during business hours.
A cash reward linked to the value of the company’s shares, paid without issuing shares.
No. No shares are issued, so shareholding does not change.
As salary in the employee’s hands, with TDS by the company.
No. Phantom plans in unlisted companies are contractual and are not governed by Rule 12.
When the company wants to share value without dilution, or cannot easily issue shares to certain employees.
ACS – Director, Expertvuw Management Pvt Ltd
This work is handled by Expertvuw’s team, with filings made on the MCA portal. Certifications and audits required by law are issued by independent practising professionals engaged for your case.