Yes, within limits. Sweat equity shares — issued for know-how, IP or value addition rather than cash — are permitted under Section 54 of the Companies Act, and startups get relaxed limits for several years after incorporation.
The mechanics matter: a special resolution, a Registered Valuer's valuation of both the shares and the consideration (the know-how or IP), lock-in requirements, and caps as a percentage of paid-up capital. The recipient is taxed on the perquisite value, so the valuation drives a real tax bill.
Sweat equity is a useful tool for correcting founder equity splits or rewarding early contributors — but it is a structured transaction, not a board-meeting afterthought.