Tax Planning & FEMA
How Foreign RSUs Are Taxed in India (FY 2026-27): Vesting, Sale, Schedule FA and FTC
Foreign RSUs are taxed twice in India, on two different amounts: as salary when they vest and as capital gains when you sell. Here is how each stage works for FY 2026-27, with one example carried from vesting to sale.
Abhighyan Sinha
If your employer is listed abroad and part of your pay arrives as RSUs, India taxes those shares at two points. The value of the shares is taxed as salary when they vest, and any gain after that is taxed as capital gains when you sell.
Your employer handles only the first of these, and often only part of it. Advance tax, dividends, capital gains and foreign asset reporting are all yours to manage.
This guide covers each stage for FY 2026-27 (Tax Year 2026-27), the first year under the Income-tax Act, 2025. It follows one example, Priya, from vesting through to sale.
Table of contents
- The two taxable events
- Do I get taxed twice on RSUs?
- At grant: nothing is taxed
- At vesting: taxed as salary
- How much tax will I pay on RSUs?
- At sale: taxed as capital gains
- US-listed vs Indian-listed RSUs
- What your employer does not cover
- Where RSUs go in your tax return
- How residential status changes the picture
- Old vs new tax regime in an RSU year
- Common mistakes
- About Paasa
The two taxable events
Vesting. The fair market value (FMV) of the shares that vest is a perquisite. It is added to your salary for the year and taxed at your slab rate, whether or not you sell.
Sale. When you sell, the difference between the sale value and the value already taxed at vesting is a capital gain or loss.
Everything else in this guide is detail on these two events, plus the reporting that sits around them.
Do I get taxed twice on RSUs?
No. Salary tax at vesting and capital gains tax at sale fall on two different amounts. The value taxed at vesting becomes your cost of acquisition, so only the gain after vesting is taxed when you sell.
It can still feel like double tax because both events come from the same shares, and because the first one arrives before you have received any cash. If the share price falls after vesting, you book a capital loss on sale. The salary tax you paid at vesting is not refunded.
At grant: nothing is taxed
A grant is a promise of shares in the future. You do not own anything yet, so there is no income, no tax and nothing to report in your return.
Unvested units also stay out of Schedule FA. Only shares that have vested and been delivered to you are foreign assets.
At vesting: taxed as salary
On the vesting date, the shares become yours. Their FMV is a perquisite under section 17(1)(d) of the Income-tax Act, 2025 (section 17(2)(vi) of the 1961 Act) and forms part of your salary income.
1. How the perquisite is valued
For shares listed on a foreign exchange, the FMV per share in foreign currency is converted into rupees. Under Rule 206 of the Income-tax Rules, 2026, salary income in foreign currency is converted at the SBI telegraphic transfer buying rate (TTBR) on the last day of the month before the month in which it becomes due.
So for a July vest, the rate is SBI's TTBR for 30 June.
Perquisite (INR) = shares vested × FMV per share × SBI TTBR on the last day of the previous month
For how the FMV itself is determined, read fair market value of RSUs explained.
2. How the tax is collected
Your employer must deduct TDS on the perquisite under section 392 (section 192 of the 1961 Act), like on the rest of your salary. Most employers do this through sell-to-cover: a portion of the vested shares is sold and the proceeds go towards the tax.
The perquisite and the TDS both show up in your Form 130 (the new number for Form 16) and Form 123 (earlier Form 12BA). Read how to read Form 16 if you receive RSUs to check them.
Note: You are taxed on all the shares that vest, including the ones sold to cover tax. The shares sold under sell-to-cover also produce a small capital gain or loss of their own, which you report in your return.
3. Your cost of acquisition is fixed here
The rupee value taxed as a perquisite becomes the cost of acquisition of the shares under section 73(1) (section 49(2AA) of the 1961 Act). It is fixed in rupees on the vesting date and does not move with the exchange rate afterwards.
Example. Suppose you are Priya, an engineering manager in Bengaluru whose total income falls between ₹50 lakh and ₹1 crore. On 14 July 2026, 100 shares of your US-listed employer vest at an FMV of $180 per share. Take SBI's TTBR for 30 June 2026 as ₹94.00 (an illustrative rate, close to where it stood then). Your employer uses sell-to-cover.
| Item | Amount |
|---|---|
| Shares vested | 100 |
| FMV per share | $180 |
| SBI TTBR for 30 June 2026 (illustrative) | ₹94.00 |
| Perquisite added to salary (100 × $180 × ₹94.00) | ₹16,92,000 |
| Income tax at 30% | ₹5,07,600 |
| Surcharge at 10% | ₹50,760 |
| Health and education cess at 4% | ₹22,334 |
| Total tax on the vest | ₹5,80,694 |
| Shares sold to cover the tax (at ₹16,920 per share) | 35 |
| Shares delivered to Priya | 65 |
The result: ₹5.81 lakh of tax, paid by selling 35 of the 100 shares
The tax works out to a little over 34 shares, so 35 are sold and the small excess is adjusted through payroll. Priya is taxed on all 100 shares but receives 65.
Her cost of acquisition is ₹16,920 per share, which comes to ₹10,99,800 for the 65 shares she holds.
How much tax will I pay on RSUs?
At vesting, you pay your marginal salary rate on the full value of the shares. For most RSU holders that is the 30% slab plus surcharge and cess. In Priya's case it works out to 34.32% of the vest value.
| Total income | Surcharge | Effective rate on the vest (30% slab) |
|---|---|---|
| Up to ₹50 lakh | Nil | 31.2% |
| ₹50 lakh to ₹1 crore | 10% | 34.32% |
| ₹1 crore to ₹2 crore | 15% | 35.88% |
| Above ₹2 crore (new regime) | 25% | 39% |
At sale, you pay tax only on the gain after vesting: your slab rate if you held the shares for 24 months or less, and 12.5% if you held them for more than 24 months, plus surcharge and cess in both cases.
A large vest can push your income into a higher surcharge band, which raises the rate on your entire income and not just the RSUs. Read the RSU surcharge problem between ₹50 lakh and ₹1 crore for how that works. For a lot-by-lot calculation, use our step-by-step RSU tax calculation guide.
At sale: taxed as capital gains
Selling vested shares is the second taxable event. No tax is deducted at source in India on this sale, so you compute and pay it yourself.
1. Holding period and rate
Shares listed only on a foreign exchange are treated like unlisted shares for Indian tax purposes. The holding period runs from the vesting date to the sale date.
| Holding period from vesting | Classification | Tax rate |
|---|---|---|
| 24 months or less | Short-term capital gain | Your slab rate |
| More than 24 months | Long-term capital gain | 12.5% without indexation (section 197) |
The ₹1.25 lakh long-term exemption applies only to Indian listed equity on which securities transaction tax is paid. It does not apply to foreign shares.
2. Converting the sale into rupees
Your cost is already fixed in rupees from the vesting date. The sale proceeds are converted at SBI's TTBR on the last day of the month before the month of sale, under Rule 206.
Capital gain (INR) = sale value in INR − cost of acquisition in INR
Example. Suppose Priya sells her 65 shares on 21 August 2028 at $230 per share. She has held them for more than 24 months, so the gain is long-term. That date is in the future, so assume SBI's TTBR for 31 July 2028 is ₹96.00 and her income is still between ₹50 lakh and ₹1 crore.
| Item | Amount |
|---|---|
| Sale value (65 × $230 × ₹96.00) | ₹14,35,200 |
| Cost of acquisition (65 × ₹16,920, fixed at vesting) | ₹10,99,800 |
| Long-term capital gain | ₹3,35,400 |
| Tax at 12.5% | ₹41,925 |
| Surcharge at 10% | ₹4,193 |
| Health and education cess at 4% | ₹1,845 |
| Total tax on the sale | ₹47,963 |
The result: about ₹48,000 of tax on a ₹3.35 lakh gain
Had Priya sold in 24 months or less, the same gain would have been taxed at her slab rate, or about ₹1.15 lakh. For set-off rules, loss carry-forward and the sell-to-cover lot, read capital gains tax on RSU shares.
US-listed vs Indian-listed RSUs
The vesting-day treatment is the same wherever your employer is listed. The sale side is different.
| Foreign-listed shares (for example, US) | Indian-listed shares | |
|---|---|---|
| Long-term holding period | More than 24 months | More than 12 months |
| Long-term rate | 12.5%, no exemption | 12.5% on gains above ₹1.25 lakh |
| Short-term rate | Your slab rate | 20% |
| Exchange rate conversion | Yes | No |
| Schedule FA reporting | Yes | No |
Read US-listed vs Indian-listed RSUs for the full comparison.
What your employer does not cover
Your employer's responsibility ends with TDS on the perquisite. Two things routinely fall outside it.
1. Advance tax
Capital gains on foreign shares and foreign dividends have no Indian TDS. Employers also sometimes withhold at a flat rate that is lower than your actual marginal rate once surcharge is counted.
If your tax due for the year, after TDS, is ₹10,000 or more, you must pay advance tax in four instalments (15 June, 15 September, 15 December and 15 March). Falling short leads to interest under sections 424 and 425 (earlier 234B and 234C).
Read advance tax for RSU holders for how to estimate each instalment.
2. Dividends
If you keep the shares and the company pays dividends, the US withholds 25% at source for Indian residents who have a valid W-8BEN on file. India then taxes the gross dividend at your slab rate as income from other sources.
You can claim the US tax as a foreign tax credit by filing Form 44 (Form 67 for FY 2025-26 and earlier). Read how dividend income from RSU shares is taxed and W-8BEN for RSU holders.
Where RSUs go in your tax return
RSU holders with foreign shares cannot use ITR-1. The table follows the current ITR-2 layout.
| What | Where it goes | When it applies |
|---|---|---|
| Perquisite at vesting | Schedule S (salary), matching Form 130 | Every year shares vest |
| Sale of shares, including the sell-to-cover lot | Schedule CG | Every year you sell |
| Foreign shares and brokerage account | Schedule FA | Every year you hold them as an ordinary resident, on a calendar-year basis |
| Foreign dividends and gains taxed abroad | Schedule FSI and Schedule TR, plus Form 44 | When you claim foreign tax credit |
| Assets and liabilities | Schedule AL | When total income exceeds ₹1 crore |
Schedule FA is mandatory even in a year with no vest, no sale and no dividend. Read ITR for RSU holders and Schedule FA for RSU holders for the line-by-line detail.
How residential status changes the picture
| Status | Perquisite at vesting | Gain on selling foreign shares | Schedule FA |
|---|---|---|---|
| Resident and ordinarily resident (ROR) | Fully taxable | Taxable | Required |
| Resident but not ordinarily resident (RNOR) | Taxable for the part earned through work in India | Not taxable if received outside India | Not required |
| Non-resident (NR) | Taxable for the part earned through work in India | Not taxable in India | Not required |
If you worked in more than one country during the vesting period, the perquisite is split by the days worked in each. Read are RSU vesting events taxable during RNOR and RSU taxation across multiple countries.
Old vs new tax regime in an RSU year
The RSU perquisite is taxed as salary under both regimes, and the capital gains rates are the same in both. The difference lies in the slabs, the deductions and the top surcharge.
- New regime (the default): lower slab rates, few deductions, and surcharge capped at 25%. The highest rate on a vest is 39%.
- Old regime: deductions such as 80C and home loan interest remain, but surcharge rises to 37% above ₹5 crore. The highest rate on a vest is 42.74%.
Run both before you file, because a big vest year can change the answer from the year before.
Filing for FY 2025-26? Income up to 31 March 2026 is still governed by the Income-tax Act, 1961. Use the old numbers: section 17(2)(vi) for the perquisite, section 49(2AA) for cost of acquisition, section 192 for TDS, Rule 115 for the exchange rate and Form 67 for foreign tax credit. The rules themselves did not change. See our old-to-new section mapping.
Common mistakes
- Assuming tax is due only on sale. The larger tax bill arrives at vesting, before any cash does.
- Using the grant price or the sale price as cost. Your cost is the rupee value taxed at vesting.
- Using the wrong exchange rate. Both the perquisite and the sale use SBI's TTBR on the last day of the previous month, not the rate on the day or your bank's rate.
- Applying the ₹1.25 lakh exemption or the 12-month rule. Both belong to Indian listed equity.
- Skipping Schedule FA in a quiet year. Holding the shares is enough to trigger it.
- Ignoring advance tax. TDS at vesting rarely covers surcharge, dividends and capital gains.
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- Tax reports for your return: year-end reports aligned with Indian ITR requirements, covering Schedule CG, Schedule FA, Schedule OS/FSI and your foreign tax credit claim.
Frequently Asked Questions
Is RSU vesting taxable in India?
Yes. When RSUs vest, the fair market value of the shares is treated as a perquisite and taxed as salary at your slab rate, even if you do not sell. Your employer deducts TDS on it, usually by selling some of the vested shares.
Are RSUs taxed when granted or when vested?
RSUs are taxed when they vest, not when they are granted. A grant is only a promise of future shares, so it creates no income and nothing to report. The first tax arises on the vesting date, and the second arises when you sell.
Do I have to pay capital gains tax on RSU?
Yes, when you sell the shares for more than their value on the vesting date. The gain is short-term and taxed at your slab rate if you held the shares for 24 months or less from vesting, and long-term and taxed at 12.5% if you held them for more than 24 months.
What is the cost of acquisition of RSU shares?
It is the rupee value that was taxed as a perquisite when the shares vested. It is fixed on the vesting date and does not change with later exchange rate movements, so only the growth after vesting is taxed as capital gains.
Which exchange rate applies to RSUs?
The SBI telegraphic transfer buying rate on the last day of the month before the month of vesting is used for the perquisite. For the sale, the proceeds are converted at the same rate on the last day of the month before the month of sale.
Does the ₹1.25 lakh long-term capital gains exemption apply to foreign RSU shares?
No. The ₹1.25 lakh exemption applies only to Indian listed equity on which securities transaction tax is paid. Long-term gains on foreign shares are taxed at 12.5% from the first rupee.
What happens if the share price falls after vesting?
You book a capital loss when you sell, which can be set off against capital gains under the usual rules and carried forward for up to eight years if you file on time. The salary tax paid at vesting is not refunded, because it was charged on the value on the vesting date.
Is the TDS deducted by my employer enough?
Often it is not. TDS covers the perquisite only, and sometimes at a rate lower than your actual marginal rate after surcharge. Capital gains and foreign dividends have no Indian TDS, so you may need to pay advance tax during the year.
Do I need to report RSUs in my ITR if I did not sell any?
Yes. The perquisite appears in your salary schedule in the year of vesting, and if you are resident and ordinarily resident you must report the shares you hold in Schedule FA every year, even when there is no sale or dividend.
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