The fundamentals
RSU = Restricted Stock Unit, granted by your employer (often US-parent) and vesting over time (typically 4-year vest, 25%/year, sometimes with 1-year cliff).
At each vest: the fair market value (FMV) of the vesting shares is added to your salary as PERQUISITE and taxed at SLAB RATE. Your employer withholds TDS on this perquisite, usually by selling a portion of the vested shares ('sell-to-cover').
When you eventually SELL the vested shares: any gain (sale price − FMV-at-vest) is taxed as CAPITAL GAIN. For US-listed shares: STCG ≤24 months at slab rate; LTCG > 24 months at 12.5% (no indexation, no ₹1.25L exemption — that's for INDIAN listed equity only).
The two tax events explained
Layer 1: Vesting (perquisite)
Vested 100 shares at FMV $150 each = ₹15,000 USD = ~₹12,45,000 (actual conversion: SBI TT-Buy rate on the vest date). This entire ₹12.45L is added to your salary in the financial year of vesting. At 30% slab + cess = ~₹3.9L tax. Your employer typically sells 30-35% of the vest to cover this tax (sell-to-cover). You keep ~65-70 shares.
Layer 2: Sale (capital gain)
You hold the remaining 65 shares for 3 years. They appreciate to $200 each. You sell. Gain per share = $200 − $150 = $50 × 65 = $3,250 = ~₹2,69,750. Held > 24 months = LTCG at 12.5% (foreign equity) = ~₹33,720 + cess. STCG (<24 months) would be slab rate = ~₹80,925.
Schedule FA reporting (annual)
Every Indian resident holding foreign shares must declare them under Schedule FA of ITR-2/ITR-3, regardless of size. Disclosure is on the calendar-year basis (not financial year). Missing Schedule FA carries a penalty of ₹10L per missed disclosure under the Black Money Act — far worse than the actual tax saving from non-disclosure.
INR vs USD
All values are converted at the SBI TT-Buy rate on the date of each event. The FX gain/loss between vest and sale is captured implicitly in the INR-denominated gain (no separate FX gain calculation needed for capital gains on foreign equity).
Worked example
Vested ₹15L of US RSUs in FY 25-26 + sold ₹10L worth of older vested shares (>24 months) at ₹3L gain.
Vest perquisite
₹15L added to salary. At 30% slab + 4% cess = ₹4,68,000 tax. Employer typically sells-to-cover ~32% (~₹4.8L) on vest day.
Sale LTCG
₹3L gain × 12.5% + 4% cess = ₹39,000. Schedule FA must be filed declaring the holding regardless of sale.
Total RSU-related tax for the year: ₹5.07L. Cash impact: ~₹4.8L was already withheld at vest via sell-to-cover; you owe the remaining ~₹27K + LTCG tax with your ITR.
Numbers indicative. Actual FX rate, perquisite valuation, and surcharge depend on your employer's reporting + your total income.
Important caveats
Sell-to-cover doesn't always cover correctly. Your employer might withhold based on a flat 30% rate, but if your effective rate (with surcharge for ₹50L+ income) is 35-39%, you'll owe more at ITR time. Plan cash for a ₹2L-5L top-up in July.
ESOPs from an UNLISTED Indian company have DEFERRED tax (you can defer the vest tax to the earliest of: sale, leaving employment, or 5 years from vest). RSUs from a LISTED company (Indian or foreign) do NOT have this deferral.
If your company IPOs while you hold RSUs, the FMV changes overnight. Vests AFTER IPO use post-IPO market price as FMV → higher perquisite tax. Plan exit timing carefully.
Foreign-equity LTCG does NOT use the ₹1.25L exemption (that's for Indian listed equity only). Even ₹10K of foreign-equity LTCG is taxable.
Schedule FA disclosure is on the CALENDAR YEAR (Jan-Dec). If you hold US shares on 31-Dec of any year, you MUST declare them in the FOLLOWING ITR — even if you sold them in January.
Common questions
My employer sold shares at vest. Do I still owe more tax?
Possibly. Sell-to-cover usually uses a flat rate (30% or so). If your actual effective rate is higher (surcharge above ₹50L, 39% peak rate), you owe the gap at ITR. Conversely if it's lower, you may get a refund. Always reconcile your Form 16 against the vest-event statements.
Can I avoid the vest tax by not selling?
No. Perquisite is taxable at VEST, not at SALE — whether you sell or hold, the tax is due. The choice of when to sell only affects the SECOND layer (capital gains).
What if the stock crashes after vest — I'm taxed on FMV that's gone?
Welcome to the worst part. You pay perquisite tax on the VEST-DAY FMV. If the stock then halves, you've paid 30% tax on a value you no longer have. The subsequent loss on sale becomes a CAPITAL LOSS (carries forward 8 years against future gains).
Do RSU dividends count toward something?
Yes — foreign-equity dividends are slab-rate income in India (after foreign withholding tax). Use the DTAA to claim credit for US withholding (typically 25% under the US-India treaty). File Form 67 before your ITR to claim foreign-tax credit.
How does Sajag handle RSUs?
Sajag reads E*Trade / Carta / Shareworks statements + your Form 16 perquisite line + (separately) any sale broker statement. It reconciles all three into one capital-gains + perquisite ledger ready for ITR. Schedule FA reminder fires at calendar-year-end.
When this doesn’t apply
- • Your RSUs are from a PRIVATE Indian startup — different (better) deferral rules apply. Use the ESOP deferment scheme.
- • You're an NRI/RNOR at vest — taxation differs based on your residency status. Get a cross-border CA.
Related guides
From article to your numbers
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