What an 83(b) election does
Founder stock is usually subject to vesting — the company can buy back unvested shares if you leave. Under US tax rule Section 83, stock that is still “substantially nonvested” is by default taxed as it vests, on its value at each vesting date. If the company’s value rises, so does the tax.
An 83(b) election tells the IRS you choose to be taxed on the stock’s value when it is issued instead. For founders who pay fair value for their shares at incorporation, that taxable amount is typically zero — and later growth is treated as capital gain when you sell, with the holding period starting at issuance.
A quick example
- You buy 4,000,000 founder shares at $0.00001 each — their fair value on day one — with four-year vesting.
- With an 83(b): taxable income at issuance = value minus price paid = $0. Nothing more is taxed as shares vest.
- Without an 83(b): each tranche is valued as it vests. If the company has raised at a higher valuation by then, the difference is taxable ordinary income for a US taxpayer — even though you haven’t sold anything.
Does it matter if you live in India?
Section 83 is a US tax rule, so its impact depends on whether you are, or may become, subject to US tax on this income:
- US citizens, green-card holders or US tax residents among the founders — the election is usually essential.
- Founders who may move to the US during the vesting period — filing is generally a cheap safeguard, because vesting after you become a US taxpayer could otherwise be taxed in the US.
- Founders who will stay India-resident throughout — the US impact is often limited, but many advisors still recommend filing as low-cost protection, and investors’ lawyers commonly ask whether it was done.
Because the decision depends on your plans and residency, take advice at incorporation — not after the 30 days have run.
How to file
- Deadline: no later than 30 days after the shares are transferred to you (the issue date in your stock purchase agreement). There is no extension.
- Form: use IRS Form 15620, or a written statement containing the information Treasury regulations require. Either is valid.
- Submission: the IRS introduced an online filing option in 2025, which works through an IRS online account; founders without US identity credentials typically file on paper, by mail to the IRS address in the current instructions, using a trackable courier.
- Copies: give a copy to the company and keep proof of filing and delivery permanently — investors will ask for it in due diligence.
Mistakes to avoid
- Counting 30 days from incorporation or from signing a term sheet rather than from the share issuance.
- Posting by ordinary international mail with no proof of delivery.
- Not paying for the shares — the stock purchase agreement should show the price actually paid.
- Assuming the incorporation service filed it for you.
The Indian side
If you’re resident in India, subscribing to founder shares in a Delaware company is an overseas investment: the money goes through your AD bank, is reported in Form FC, and the shares go into Schedule FA of your Indian tax return. See FEMA, ODI & tax rules for US companies. For employees in India receiving options from the US company, see US parent ESOPs.
Setting up now? Start with how to register a US company from India or US company registration.
Frequently asked questions
What is the deadline for an 83(b) election?
Can an 83(b) election be filed online?
Do Indian-resident founders need to file an 83(b) election?
Is Form 15620 mandatory for an 83(b) election?
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.