If you hold RSUs from a company like Google, Microsoft, or Amazon, your annual ITR filing looks different from a standard salaried return. The income shows up across two different tax heads, it involves a foreign currency conversion, and it pulls in parts of the ITR that most salaried filers never open. This guide covers which form to use, where each component of RSU income gets reported, and how to convert the numbers correctly.
Table of contents
- Which ITR should I use?
- What happens before your RSUs vest?
- Tax on vest day: salary income, not capital gains
- How does currency conversion work?
- Capital gains when you sell
- Schedule FA: the disclosure that runs on a different calendar
- Dividends from your RSU shares
- How Paasa helps
Which ITR should I use?
ITR-2.
Most salaried employees default to ITR-1 (Sahaj) because it covers salary and interest income. But ITR-1 explicitly excludes anyone who holds foreign assets, has capital gains, or earns foreign income. The moment your RSUs vest, you own shares in a foreign company. That alone rules out ITR-1, even if you have not sold a single share.
| Who it covers | Applies to RSU holders? | |
|---|---|---|
| ITR-1 (Sahaj) | Salaried residents, income up to ₹50L, no foreign assets, no capital gains | No. Holding vested RSUs from a foreign company disqualifies you. |
| ITR-2 | Individuals with salary, capital gains, and/or foreign assets; no business income | Yes. This is the correct form for most salaried RSU holders. |
| ITR-3 | Individuals with income from business or profession | Only if you also have freelance, professional, or business income alongside your RSUs. |
Note: Filing ITR-1 when you hold foreign equity is not just a form error. It leaves Schedule FA entirely unfiled, which attracts a penalty of up to ₹10 lakh per year under the Black Money Act, regardless of whether any tax was underpaid. If you have been filing ITR-1 while holding RSUs, file a revised or updated return for the years that are still open.
What happens before your RSUs vest?
Nothing, from a tax perspective.
Unvested RSUs are not an asset you own. They are a contractual promise from your employer to deliver shares on a future date, conditional on you staying and meeting the vesting schedule.
There is no income event, no disclosure requirement, and nothing to report in your ITR.
The tax clock starts only on the date your shares vest.
Tax on vest day: salary income, not capital gains
When your RSUs vest, the shares are treated as a perquisite under the head Salaries. The taxable value is the fair market value (FMV) of the shares on the vest date, minus anything you paid for them.
Since RSU holders typically pay nothing, the entire vest-day FMV becomes perquisite income for that financial year.
Your employer deducts TDS on this amount. The rupee value appears in your Form 16 under the perquisites section, already converted to INR. Read how to read your Form 16 when you have RSUs.
How does currency conversion work?
The FMV of your shares (in USD, or whichever currency your company's stock trades in) is converted to INR using the SBI TT buying rate (TTBR) on the last day of the month immediately preceding the month of vesting.
If your shares vest on September 10, 2026, the relevant rate is the SBI TTBR on August 31, 2026. If your shares vest on April 3, 2026, the relevant rate is the SBI TTBR on March 31, 2026.
Why the SBI TTBR is used and how to find it
Example
Suppose 50 Google shares vest on September 10, 2025, at a closing price of $212 per share. The SBI TTBR on August 31, 2025 is ₹84.50.
| Amount | Note | |
|---|---|---|
| FMV on vest date (A) | $212 per share | |
| Total USD value | $10,600 | 50 shares × $212 |
| SBI TTBR on August 31, 2025 (B) | ₹84.50 per dollar | Last day of month preceding September |
| Perquisite value (A × B) | ₹8,95,700 | Taxable as salary in FY 2025-26 |
This ₹8,95,700 appears in your Form 16 and flows into Schedule S of your ITR-2 alongside your regular salary. You do not enter it separately as other income.
After vesting, the shares are just stocks
Once your RSU shares land in your brokerage account, they are ordinary equity. You own them the same way you would own any stock you had bought on the open market.
Holding the shares creates no tax event. You are not taxed on unrealized gains, price fluctuations, or the passage of time. The next tax event is when you sell.
This is worth stating plainly because it trips people up: the same shares that generated salary income on vest day now behave like any other stock in your portfolio. Everything from here is capital gains territory.
Capital gains when you sell
When you sell your RSU shares, the gain is taxed as capital gains, not salary. Two things determine your tax: how long you held the shares and how much you gained.
Note: Once your RSUs vest, they are treated as normal equities (foreign equities in this case) and the capital gains are taxed accordingly.
What is your cost of acquisition?
Your cost of acquisition is the vest-day FMV converted to INR. This is the same value that was already taxed as perquisite income. You are not taxed twice on the same amount. The vest-day value is your starting point, not zero.
For the capital gains calculation, use the SBI TTBR on the last day of the month preceding the month of vesting. This is the same rate your employer used when computing the perquisite, so your Form 16 perquisite value and your cost of acquisition will typically match. If there is any discrepancy, use what your Form 16 shows.
How do you convert the sale proceeds?
Convert your sale price to INR using the SBI TTBR on the last day of the month preceding the month of sale. If you sell in November, use the October 31 rate. If you sell in April, use the March 31 rate.
What are the holding period and tax rates?
Foreign-listed shares are classified as long-term if held for more than 24 months from the vest date, and as short-term gains if held for less than 24 months.
| Holding period from vest date | Classification | Tax |
|---|---|---|
| Up to 24 months | Short-term capital gains (STCG) | At your income slab rate |
| More than 24 months | Long-term capital gains (LTCG) | 12.5%, without indexation |
Read the full breakdown of LTCG vs STCG on RSU shares with examples.
Example
Suppose your RSUs vested on September 10, 2025 and you received a total of 50 shares.
You sell all 50 shares on January 15, 2026, at $310 per share.
| Amount | Note | |
|---|---|---|
| Total sale proceeds | $15,500 | 50 shares × $310 |
| SBI TTBR on December 31, 2025 | ₹86.00 per dollar | Last day of month preceding January |
| Sale proceeds in INR (A) | ₹13,33,000 | |
| Cost of acquisition (B) | ₹8,95,700 | FMV on vest day, already taxed as salary |
| Capital gain (A minus B) | ₹4,37,300 | |
| Holding period | 4 months | September 10, 2025 to January 15, 2026 |
| Classification | STCG | Under 24 months |
| Tax | At slab rate |
Capital gains on foreign shares are reported under Schedule CG in your ITR-2.
Note: If you hold RSUs from multiple vesting dates, each tranche has its own cost of acquisition and its own 24-month clock. A tranche that vested in June 2025 and one that vested in November 2025 are treated completely separately for both cost of acquisition and classification.
Schedule FA: the disclosure that runs on a different calendar
Whenever you hold shares in a foreign company (or any other foreign asset) at any point during a calendar year, you are required to disclose them in Schedule FA (Foreign Assets) of your ITR.
This applies even if you did not sell any shares and have zero capital gains to report for the year.
Two things to know upfront.
- Schedule FA follows the calendar year, not the Indian financial year. For the ITR filed for AY 2026-27 (FY 2025-26), Schedule FA asks you to disclose assets held between January 1, 2025 and December 31, 2025, not between April 1, 2025 and March 31, 2026.
- Unvested RSUs do not go in Schedule FA. Unvested shares are not an asset you own. Vested shares sitting in your brokerage account, even if you have not sold them, must be disclosed.
Read the full walkthrough of what to disclose in Schedule FA as an RSU holder.
Dividends from your RSU shares
In India, dividend income from your RSU shares is taxed as income from other sources at your slab rate. The withholding tax already deducted can be claimed as a Foreign Tax Credit via Form 67.
Form 67 Guide for Indian Investors
How Paasa helps
Managing RSUs from a foreign company means tracking vest dates, conversion rates, multiple tranches, and two separate tax heads across financial years. Paasa is built for exactly this.
All transactions are recorded in a format that makes your Schedule CG, Schedule FA, and Form 67 filings straightforward, without having to manually reconcile a foreign broker statement at the end of March.
