Your vesting schedule, decoded
If you have RSUs from Google, Amazon, Microsoft, Meta, or Qualcomm, your grant does not turn into shares all at once. It vests in pieces over several years, and each piece is a separate taxable event with its own cost basis. Understanding the shape of your vesting schedule, not just the headline grant number, tells you when you will owe tax, how many separate lots you will need to track, and how fast your exposure to a single stock builds up.
This post covers the standard 4-year/25% cliff structure, the difference between monthly and quarterly vesting, why some companies (Amazon being the best-known example) back-load their schedules, and why each vest is a distinct tax event and a distinct lot for your records.
The standard structure: 4 years, with a 1-year cliff
Most large tech companies grant RSUs on a schedule with two features stacked together: a cliff, and a vesting period.
A cliff means nothing vests until you have completed a minimum period of employment, most commonly one year. If you leave before the cliff, you get nothing from that grant, even though a full year has technically passed. Once you clear the cliff, a chunk of shares vests immediately, and the rest vests gradually afterward.
The most common version of this structure across large tech employers is a 4-year total vesting period with a 1-year cliff at which 25% of the grant vests, followed by the remaining 75% vesting gradually (commonly monthly) over the remaining three years.
What the Paasa knowledge base does confirm, and what matters more for your taxes than the exact cliff percentage, is this: you do not own anything, and owe no tax, until a tranche actually vests. The grant itself creates no tax liability and requires no reporting. You become the legal owner of RSU shares only when they vest, not when they are granted. Vesting is the first of two taxable events for RSUs, the second being the eventual sale.
Monthly vs quarterly vesting cadence
Once you clear the cliff, the remaining shares vest on a set cadence, typically monthly or quarterly, until the grant is fully vested. This cadence matters for two practical reasons.
More vest events means more separate lots to track. Most employees do not receive all their RSUs in a single vesting event. RSUs vest over several months or years, and each vesting event creates a separate lot that must be tracked independently for tax purposes. A monthly cadence after the cliff can mean 36 separate vest dates (and therefore 36 separate lots) over the remaining three years of a 4-year grant, compared to roughly 12 vest dates under a quarterly cadence. More lots means more FMV-and-exchange-rate lookups, more cost basis entries, and more individual 24-month LTCG clocks to track (see section 4).
Each vest is a separate payroll event. Because the fair market value (FMV) of vested shares is treated as a perquisite and taxed as salary income on the vesting date, a monthly cadence means your payslip (and your employer's TDS withholding) reflects an RSU-driven spike roughly every month rather than once a quarter or once a year. Employers usually deduct this tax underSection 192 of the Income-tax Act at the time of vesting, most commonly through sell-to-cover, where enough shares are sold automatically to cover the estimated tax and you're credited with the rest.
For the mechanics of how sell-to-cover actually reduces your share count, seeWhat is "sell to cover"? Why fewer RSU shares land on vest day.
Back-loaded schedules: the Amazon example
Not every company vests evenly. Some, most notably Amazon, use a schedule that is deliberately back-loaded, meaning a small share vests in the early years and a much larger share vests toward the end of the grant.
The structure commonly reported for Amazon's on-hire RSU grants is roughly 5% in year one, 15% in year two, and 40% in each of years three and four (often split into two vests within each of those years).
Why this matters for you, regardless of the exact split: a back-loaded schedule means your early years of tenure look light on RSU income, and your later years carry a much bigger tax and concentration jump. If you're comparing offers or planning cash flow, do not assume a flat 25%-a-year pace just because that's the common default elsewhere. Pull your actual vesting schedule document and calendar out the real vest dates and share counts, especially for years three and four where the bulk of a back-loaded grant lands.
Refresher grants, which most large tech employers issue annually on top of your original grant, layer their own cliffs and cadences on top of whatever is already vesting. Once you have two or three years of refreshers stacked on your original grant, your vest calendar can include events almost every month, each one its own tax event, even if any single grant's schedule looks simple in isolation.
Each vest is its own tax event and its own lot
This is the part that trips people up most often, and it's worth stating plainly: your vesting schedule is not just a timeline for receiving shares. It is a timeline for tax liabilities and record-keeping obligations, one per tranche.
At each vest date:
- The FMV of the shares vesting that day, converted to INR using the SBI TT Buying Rate generally applicable on the vesting date, is added to your salary income and taxed at your slab rate.
- That same FMV becomes the cost of acquisition (cost basis) for that specific lot of shares, a figure that does not change even if some shares from that vest are sold to cover tax.
- A separate 24-month holding-period clock starts running for that lot alone, counted from that lot's own vest date to its eventual sale date. Shares from that lot sold within 24 months of its vest date are short-term capital gains taxed at your slab rate; sold after 24 months, they're long-term capital gains taxed at 12.5% without indexation.
Lots from different vest dates cannot be combined into a single calculation when you eventually sell, because doing so produces the wrong cost basis and the wrong holding-period classification.
Example. Suppose you are tracking three lots from the same underlying grant, vesting six months apart as the schedule progresses through its cliff and cadence:
| | | | | | | :-: | :-: | :-: | :-: | :-: | | \\Vest date\\ | \\Shares\\ | \\FMV per share (USD)\\ | \\SBI TTBR (USD/INR)\\ | \\Cost of acquisition (INR)\\ | | 1 April 2025 | 100 | $500 | ₹85.60 | ₹42,80,000 | | 1 October 2025 | 100 | $550 | ₹88.70 | ₹48,78,500 | | 1 April 2026 | 100 | $600 | ₹92.64 | ₹55,58,400 | | \\Total\\ | \\300\\ | | | \\₹1,47,16,900\\ |
The result: three lots, three separate cost bases, three separate 24-month LTCG clocks, and three separate salary-income entries in the years they vested, all from what might look like "one grant" on your offer letter. If you sell 150 shares two years from now, which lot they come from (and whether that specific lot has crossed its own 24-month mark) determines whether that sale is taxed as short-term or long-term gains.
This per-lot tracking obligation also carries into Schedule FA: each RSU vesting tranche is entered as its own separate line, with its own vest date and initial value. For the full disclosure mechanics, seeWhat is Schedule FA and why you need it if you have RSUs. For the complete vest-to-sale tax walkthrough, seeRSU taxation explained: from grant and vesting to sale andhow to calculate RSU taxes: a step-by-step guide.
Why the shape of your schedule matters beyond taxes
A cliff-and-cadence schedule that repeats every year, stacked with annual refresher grants, means two things build up together the longer you stay: the number of tax events and lots you're responsible for tracking, and the size of your position in a single company's stock relative to your overall net worth. A back-loaded schedule like Amazon's compounds the second effect, since the biggest vests (and the biggest concentration jumps) land in your later years of tenure, often right as refresher grants start layering on top.
Neither problem is solved by understanding your vesting schedule alone. Knowing when shares vest tells you when tax is due and when a new lot starts its LTCG clock. What you do with the shares once they vest, whether you hold, diversify, or reinvest globally, is a separate decision.
