Restricted Stock Units (RSUs) are a common part of tech and MNC compensation in India. On paper they look like free shares. For tax, they behave like a cash bonus on the day they vest, plus a separate capital gains event when you sell.
If you get US or Indian company RSUs, you need three things in order: how vesting is taxed as salary, how sale creates capital gains, and whether Schedule FA applies while you hold foreign shares. Pair this with the free RSU Tax Calculator and Schedule FA Calculator. Budget changes and residency status can alter the answer, so use this as a filing checklist, not personalised advice.
What an RSU is (and what it is not)
An RSU is a company promise to deliver shares (or cash equal to shares) after you meet vesting conditions, usually time-based service. Until vesting, you typically do not own the shares and cannot sell them.
RSUs are not the same as:
Employee Stock Options (ESOPs / stock options). Options give you a right to buy at a strike price. RSUs usually have no exercise price. Taxation timing and valuation rules differ.
ESPP (Employee Stock Purchase Plan). ESPP lets you buy shares at a discount through payroll. Purchase date and discount rules differ from RSU vesting.
Phantom stock or cash-settled awards. Some plans pay cash instead of shares. Cash awards are usually pure salary without capital gains later.
If your grant letter says Restricted Stock Units, focus on vest dates, share counts, and the equity portal FMV, not on option exercise math.
The two tax events that matter
1) Vesting: taxed as salary
When RSUs vest, the fair market value (FMV) of the shares that become yours is treated as a perquisite under the Income-tax Act (commonly discussed under Section 17(2) for specified securities / sweat equity). That value is added to your salary for the financial year of vesting and taxed at your slab rates.
Rough formula:
Perquisite value (INR) = Number of shares vested × FMV per share on vest date (converted to INR)
Employers often deduct TDS under Section 192 in the vest month, sometimes by selling a portion of shares (sell-to-cover). Check Form 16 Part B and the vest confirmation email. If RSU perquisite is missing from Form 16 but AIS shows it, fix the mismatch before you file.
NOTE
Cost basis for a later sale is this same FMV (Section 49(2AA)). Save the vest-day FMV in INR. Broker portals sometimes show USD cost or a zero basis, which is wrong for Indian capital gains if salary tax was already paid on FMV.
2) Sale: taxed as capital gains
When you sell vested shares, capital gains equal:
Sale consideration − Cost of acquisition (vest FMV) − transfer expenses
If the share price fell after vesting, you may have a capital loss. Loss set-off and carry-forward follow capital gains rules, not salary rules.
Foreign / US-listed shares (typical MNC RSUs):
| Holding from vest to sale | Usual treatment for residents |
|---|---|
| 24 months or less | Short-term capital gains, taxed at slab rates |
| More than 24 months | Long-term capital gains, commonly 12.5% without indexation (post Budget 2024 changes), plus cess |
The Rs 1.25 lakh Section 112A exemption for Indian listed equity generally does not apply to foreign shares without Indian STT.
Indian-listed RSUs with STT:
| Holding from vest to sale | Usual treatment |
|---|---|
| 12 months or less | STCG under Section 111A (often 20% under recent rules) |
| More than 12 months | LTCG under Section 112A at 12.5% above the annual exemption, subject to eligibility |
Confirm current rates for your assessment year before you pay advance tax. Use the RSU Tax Calculator to stress-test vest tax and sale tax with your share count and prices.
USD to INR: use SBI TT buying rate
For US RSUs, almost every Indian computation starts with an exchange rate choice. For tax and Schedule FA practice, convert using the SBI TT buying rate on the relevant date:
- Vest date: convert FMV for salary perquisite
- Sale date: convert sale proceeds (and keep vest-day INR cost consistent with what was taxed)
- Calendar year reporting: convert peaks and closing values for Schedule FA
Credit card rates, Wise mid-market rates, and Google Finance snapshots are fine for personal tracking. They are a poor match for ITR work when the department or your CA expects SBI TT.
Sell-to-cover, net shares, and Form 16
Example pattern many FAANG and product companies use:
- 100 shares vest at FMV equal to Rs 12.5 lakh total.
- Employer sells 30 shares to cover estimated TDS.
- You receive 70 shares in Schwab / E*TRADE / Fidelity (or the plan broker).
Tax points people miss:
- Salary perquisite is usually on the gross 100 shares, not only the 70 delivered.
- Your brokerage account shows 70 shares. Capital gains later apply only to shares you actually sell from those 70 (plus any earlier lots).
- Form 16 should reflect the perquisite and TDS. If TDS looks low relative to your slab, you may owe self-assessment or advance tax.
Keep PDF vest notices, tax withholding summaries, and year-end broker statements in one folder before tax season.
Schedule FA: disclosure even when tax is already paid
If you are Resident and Ordinarily Resident (ROR) and hold foreign shares or a foreign brokerage account, you generally must report them in Schedule FA.
Key differences from salary tax:
- Schedule FA uses the calendar year (1 Jan to 31 Dec), not the Indian financial year.
- You report even if you paid full TDS on vesting and did not sell.
- Unvested RSUs are usually not reported. Vested shares are.
- Foreign bank or brokerage accounts often need reporting even with a small or zero closing balance if the account existed in the year.
Missing or wrong Schedule FA can attract a flat Rs 10 lakh penalty under the Black Money Act for the year, which is why this schedule gets more attention than the tax rupees involved.
Use the Schedule FA Calculator to convert peaks and closing values to INR, then cross-check against broker year-end statements.
WARNING
Schedule FA is about disclosure. Filling it does not replace computing salary perquisite or capital gains. File all applicable schedules.
Dividends, Form 67, and foreign tax credit
Vested shares may pay dividends. For Indian residents, foreign dividends are usually taxable in India. The US may withhold tax at source. You may be able to claim foreign tax credit under the India-US DTAA after meeting Form 67 and documentation requirements.
Capital gains taxed abroad can raise similar FTC questions. Timing of Form 67, residency, and source rules are technical. If US withholding appears on your broker 1042-S or similar statement, do not ignore it at Indian filing time.
How to prepare numbers before you file
- List every vest in the financial year with date, gross shares, FMV (USD), and SBI TT rate.
- Match Form 16 RSU perquisite and TDS to your equity portal. Raise HR tickets early if amounts differ.
- Download broker statements for the calendar year for Schedule FA and for any sales in the financial year.
- Compute capital gains lot by lot using vest FMV as cost. Do not use a broker "zero cost" import blindly.
- Run estimates in the RSU Tax Calculator, then refine with actual slab, surcharge, and loss set-off if needed.
- Decide advance tax if large vests or sales leave tax payable after TDS.
- File Schedule FA for foreign holdings and keep proofs for at least six years.
For overall regime choice and salary tax, also use the Income Tax Calculator. RSU perquisite sits inside salary, so a large vest can change Old vs New regime math.
Common mistakes that create notices
Treating vested US shares like Indian equity LTCG. Applying the Rs 1.25 lakh 112A exemption or a 12-month long-term clock to foreign shares is a frequent error.
Reporting net shares only for salary tax. Sell-to-cover reduces delivered shares. Perquisite is still on gross vesting in most employer designs.
Skipping Schedule FA because "tax was already deducted". Disclosure and tax computation are separate duties.
Using Google FX for ITR figures. Keep a SBI TT source for vest and reporting dates.
Ignoring AIS mismatches. If AIS shows foreign income or the employer reported perquisite differently, reconcile before e-verify.
Forgetting dividends. Small quarterly dividends still need correct reporting and possible FTC paperwork.
Copying a US 1099 cost basis into the Indian return. US cost basis rules differ. Indian cost for RSU shares that were taxed as salary is the vest FMV already taxed.
Worked example (illustrative)
Priya, an ROR salaried employee in Bengaluru, has US RSUs:
- 80 shares vest on 15 June when FMV is $150 and SBI TT buying rate is Rs 83. Perquisite ≈ 80 × 150 × 83 = Rs 9,96,000, taxed as salary in that financial year.
- Employer sell-to-cover delivers 55 net shares after funding TDS.
- After 26 months she sells all 55 shares when price is $180 and the applicable INR conversion for sale proceeds is documented from SBI TT on the sale date.
- Cost basis for those 55 shares uses the vest-day INR FMV per share that was taxed as salary, not zero.
- Because holding exceeded 24 months, the gain is treated as long-term foreign-share LTCG under the rules applicable to that year (commonly estimated at 12.5% without indexation after Budget 2024, plus cess). She also reports the brokerage account in Schedule FA for every calendar year she held the shares.
Change any input (shares, FX, holding period) and the tax answer moves. Run your own numbers in the calculator and keep primary statements, rather than copying a teammate's WhatsApp tip.
Documents checklist
- Grant and vest notices from the equity portal
- Form 16 Part B for the vest year
- Broker trade confirms and year-end statements
- SBI TT rate evidence for key dates
- AIS / Form 26AS screenshots if you raised feedback
- Form 67 pack if claiming foreign tax credit
- FIRC or bank credit proofs if you repatriated sale proceeds
Official filing and forms live on the Income Tax e-Filing portal. For step-by-step return filing, see e-File your income tax return.
Need help filing RSU and Schedule FA correctly?
ClearTax can help with salary perquisites, foreign asset disclosure, and capital gains when your Form 16 and broker statements do not line up.
Related Guides
- e-File Your Income Tax Return
- Old vs New Tax Regime Comparison
- How to Reply to Income Tax Notice 143(1)
- Income Tax Refund Not Received?
Need more help?
Estimate vest and sale tax with the RSU Tax Calculator, convert foreign holdings with the Schedule FA Calculator, or browse more Taxes and Finance guides. See also the Tax Season hub for related guides.