Should you have a rule for selling your RSUs, decided before the shares even land? Yes.
If you're deciding what to sell on the day the shares hit your account, you're deciding under the worst possible conditions: with a number on a screen, adrenaline, and no time to check anything. An established rule removes all three problems at once.
Table of contents
- Start with the problem the rule is solving: concentration, not timing
- Pick one mechanical rule, and only one
- Run the rule through two checks before you execute
- Write the rule down, and don't let vest day rewrite it
Start with the problem the rule is solving: concentration, not timing
Before you decide how to sell, decide why you're selling at all. For most RSU holders the answer isn't 'I think the stock will fall.' It's that a growing share of your net worth, and often your income, is tied to one employer.
Every vest adds to that position automatically, whether or not you do anything.
Refresher grants make this worse over time, because each new grant lands on top of shares you're already holding, quietly raising your exposure to a single company.
A selling rule exists to cap that exposure at a level you chose in advance. Once you're clear that concentration, not market timing, is the problem, the rule gets much simpler to write.
How much concentration is 'too much' is a personal risk-tolerance question, not a tax or legal one. This article covers how to build and execute a rule; it isn't a recommendation on where to set your own limit.
Pick one mechanical rule, and only one
The rule should be simple enough that you can apply it in under a minute, with no judgment calls. Three common shapes:
- Sell-on-vest, fixed percentage. Sell the same percentage of every vest (say, 50-100%) on a fixed schedule after each vest date, regardless of price.
- Threshold or rebalancing rule. Set a cap on what percentage of your total portfolio (or net worth) any single company's stock can represent. Whenever a vest pushes you over that cap, sell enough to bring it back down.
- Time-based drip. Instead of selling the whole vest at once, sell a fixed number of shares (or a fixed rupee amount) every month, spreading the exit over several months regardless of what any single vest looked like.
Pick one. The value of a rule comes from having exactly one thing to check on vest day, not three options to weigh.
Run the rule through two checks before you execute
A mechanical rule tells you what to sell. Before you actually place the order, run it through a tax check and a trading-window check. Skipping either is how a good rule turns into a bad outcome.
Check 1: the 24-month LTCG clock
This is the check that determines how much tax you'll actually pay, and it's the one that's easy to overlook if your rule only thinks in percentages.
Foreign shares, including RSUs from an overseas employer, are treated as unlisted equity shares for Indian tax purposes, not as listed Indian equity. That classification matters because it sets the holding period that decides your tax rate:
- Shares held for up to 24 months from the vest date are short-term capital gains (STCG), taxed at your income tax slab rate.
- Shares held for more than 24 months from the vest date are long-term capital gains (LTCG), taxed at 12.5%, without indexation.
The clock starts on the vesting date and runs to the sale date. Two things follow from this that your rule needs to account for.
Every lot has its own clock. If your RSUs vest quarterly or annually, each vesting event creates a separate lot with its own vest date, its own cost basis, and its own 24-month clock. Lots can't be combined into a single calculation when you sell.
A 'sell 50% of every vest' rule is easy to apply per lot. A 'sell whenever my total position crosses a threshold' rule needs to take into account the tax implications of your specific case.
Cost basis is the FMV at vest, not the price you sell at. Your cost basis for each lot is the fair market value of the shares on the vesting date, before any tax withholding. That FMV was already taxed as salary income at vesting, so when you sell, capital gains tax applies only to the change in value after vesting, sale price minus that cost basis. If the sale price is lower than the vesting-date FMV, that's a capital loss, not a gain, and no capital gains tax is owed on it.
Check 2: your company's trading window
Separately from tax, most listed companies restrict when employees can trade company stock, through an insider trading policy that opens a 'trading window' for a period after results are announced and closes it before the next announcement or around other material non-public information.
This is a corporate policy and securities-law matter, not a tax rule, and the exact calendar (how long the window stays open, how far before earnings it closes) is set by each company individually.
No universal blackout-window length exists across companies: check your own employer's insider trading policy or stock plan documentation for the exact dates that apply to you, rather than assuming a fixed number of days.
Build this into your rule as a conditional: 'sell X on vest, unless the trading window is closed, in which case sell as soon as it reopens.' That way the rule still tells you exactly what to do even when the calendar doesn't cooperate with your vest date.
Write the rule down, and don't let vest day rewrite it
The entire point of doing this before your next vest is to remove the decision from the day the shares actually appear. On vest day, the stock might be up 20% ('just one more month, it's clearly going higher') or down 20% ('selling now locks in the loss'). Both stories feel compelling in the moment, and both are reasons to deviate from a rule you set with a clear head.
Write the rule somewhere you'll actually check it: percentage or share count, the trigger (vest date, threshold, or schedule), and the two checks above. Treat 'the rule says sell' the same way you'd treat an automatic bill payment, not a decision you revisit every cycle.
If you genuinely want to change the rule, change it deliberately, on a day when you have no shares currently vesting, not in the fifteen minutes after a vest notification email.
