Got RSUs From Your Company? Here’s the Tax Compliance You Can’t Ignore

If you work at a multinational or a listed tech company, part of your compensation is probably in Restricted Stock Units (RSUs). It’s a great wealth-building tool — but it also comes with a compliance load most salaried employees underestimate.

RSUs are taxed twice in India, and if your employer is a foreign company, there’s a third layer: foreign asset disclosure. Miss any of it, and the penalties aren’t small. Here’s what you actually need to do.

The Two Tax Events Every RSU Holder Must Know

1. At Vesting — Taxed as Salary (Perquisite)

The moment your RSUs vest, the Fair Market Value (FMV) of the shares becomes taxable as a perquisite under Section 17(2)(vi), added straight to your salary income and taxed at your slab rate.

Since RSUs have no purchase price, the entire FMV is taxable — not just a discount or spread.
For foreign company shares, the FMV is converted to INR using the SBI TT Buying Rate (TTBR) on the vesting date.
Your employer deducts TDS on this value under Section 192 — usually by selling a portion of your vested shares (“sell-to-cover”) or adjusting it against your salary.
This should already appear in your Form 16 and, if your salary exceeds ₹1,50,000, in the itemised Form 12BA.

Important: Vesting is a taxable event whether or not you sell the shares. Many people mistakenly think tax only applies when they cash out — it doesn’t.

2. At Sale — Taxed as Capital Gains

When you eventually sell the vested shares, only the appreciation after vesting is taxed as capital gains — the FMV already taxed as perquisite becomes your cost of acquisition (Section 49(2AA)), so you’re not taxed twice on the same value.

Here’s the part that surprises most people: foreign company shares are treated as unlisted shares under Indian tax law, even if they’re listed on a foreign exchange like the NASDAQ or NYSE. That means:

Long-term if held more than 24 months from the vesting date (not 12 months, as with Indian listed shares)
LTCG rate: 12.5% without indexation — but no ₹1.25 lakh exemption, since that exemption applies only to domestic listed equity under Section 112A
STCG: taxed at your income tax slab rate if sold within 24 months

If your resulting tax liability (after employer withholding) exceeds ₹10,000 for the year, you’re required to pay it via quarterly advance tax — waiting until you file your ITR can trigger interest under Sections 234B/234C.

The Part People Forget: Schedule FA Disclosure

If your RSUs are from a foreign employer, and you’re a Resident and Ordinarily Resident (ROR) for tax purposes, you must disclose those holdings in Schedule FA (Foreign Assets) — regardless of whether you’ve sold anything, and regardless of whether there’s any tax due on them.

Key things to get right:

Schedule FA typically follows the calendar year (1 January–31 December), not the Indian financial year. So RSUs that vested in, say, October 2025 get reported in the Schedule FA for calendar year 2025, filed with your ITR for FY 2025-26.
Report your foreign equity holdings under Table A3 — this asks for country, entity name, acquisition date, and the initial, peak, and closing value in INR (again using SBI TTBR).
If your employer sold shares immediately at vesting to cover taxes (“sell-to-cover”), only the shares that actually landed in your account need to be reported as holdings.
Dividends from these shares are reported separately under Schedule OS (Income from Other Sources).
Sale proceeds go under Schedule CG (Capital Gains).

The penalty for skipping this isn’t proportional to your tax liability — it’s a flat ₹10 lakh per year of non-disclosure under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, which applies independently of whether you owe any income tax at all.

Which ITR Form Do You Need?

This is where a lot of salaried employees trip up: the moment you hold foreign shares, ITR-1 is off the table — it simply has no Schedule FA. You’ll need:

ITR-2 — if you have no business or professional income
ITR-3 — if you also have business/professional income

Claiming Foreign Tax Credit (If Tax Was Withheld Abroad)

If US (or other foreign) tax was withheld on your RSU vesting, sale, or dividends, you can typically claim relief in India under the applicable DTAA (Double Taxation Avoidance Agreement) so you’re not taxed twice on the same income.

File Form 67 to claim the Foreign Tax Credit (FTC) — ideally before filing your ITR, though under the current rules it can be filed up to the end of the relevant assessment year as long as your ITR itself was filed on time.
Complete Schedules FSI and TR in your ITR to reflect the foreign income and the credit claimed.
Keep your supporting documents ready: vesting statements, foreign tax withholding certificates (e.g., Form 1042-S for US shares), broker transaction history, and your INR-conversion workings.

A Quick Example

Say 200 shares vest on 1 January 2023 at a certain FMV, taxed as perquisite and added to your salary that year. You sell them in April 2026 — more than 24 months later, so it’s LTCG. Only the gain between the vesting-date FMV and the sale price is taxed, at 12.5%, with no ₹1.25 lakh exemption since these are foreign (unlisted) shares. Meanwhile, if you held these shares as of 31 December of any year in between, that year’s Schedule FA needed to reflect them — sold or not.

Common Mistakes We See

Assuming employer TDS covers everything — it only covers the vesting perquisite, not the eventual capital gains tax or Schedule FA compliance.
Forgetting Schedule FA because “I haven’t sold anything yet” — disclosure is required regardless of sale or income.
Filing ITR-1 out of habit — the first year you receive foreign RSUs, your filing complexity changes permanently as long as you hold those shares.
Not paying advance tax on the capital gains portion, leading to interest charges at filing time.
Missing Form 67, resulting in the Foreign Tax Credit not being reflected — meaning you pay tax twice on the same income until it’s corrected.

Let Us Handle the Compliance

RSU taxation touches salary income, capital gains, foreign asset disclosure, and DTAA relief all at once — it’s genuinely one of the more complex corners of individual tax filing in India, and small errors can mean double taxation or foreign asset non-disclosure penalties.

At EasyITR Filing, our CA team handles RSU and ESOP cases end-to-end — perquisite reconciliation against your Form 16, capital gains computation, Schedule FA disclosure, and Form 67 for foreign tax credit — over WhatsApp, with custom pricing based on your complexity.

👉 Reach out on easyitrfiling.com with your Form 16, vesting statements, and broker reports, and we’ll take it from there.

This article is for general information only and is not personalised tax advice. RSU taxation depends heavily on your specific facts — residency status, where you worked during the vesting period, and your broker’s records. Please verify your position with a qualified Chartered Accountant before filing.