If you are resigning, being laid off, or weighing a job change, here is the direct answer: any RSUs that have not vested yet are almost always forfeited the day you leave, and you owe no tax on them.
Any RSUs that have already vested before you left are yours, unaffected by your exit, and continue to be taxed exactly as they would have been if you were still employed.
The rest of this post walks through why, what changes and what doesn't the day you leave, and what's different if your company is being acquired rather than you simply quitting.
Table of contents
- What happens to unvested RSUs
- What happens to RSUs that already vested
- The cliff date is where the real cost sits
- What ends the day you leave: employer sell-to-cover TDS
- If it's not you leaving, but your company being acquired
- A 30-day checklist for after you leave
What happens to unvested RSUs
RSUs only become yours when they vest. Until then, you have a promise from your employer to deliver shares in the future, conditional on you still being employed. In most cases, if you leave your employer before your RSUs vest, any unvested RSUs are forfeited. Unvested RSUs also cannot be transferred to another broker or account; they simply stay with the employer's stock plan provider until vesting, so there is no way to 'take them with you.'
Because the shares never become yours, you don't owe any tax on forfeited unvested RSUs. There's no perquisite income, no capital loss to claim, nothing to report. From a tax return's perspective, forfeited RSUs simply never happened.
This applies whether you resign voluntarily, are laid off, or are leaving for any other reason. Most standard RSU plans work the same way on this point: the grant agreement typically doesn't distinguish between 'you left' and 'you were let go' when it comes to unvested shares, unless your specific plan or severance agreement says otherwise.
Some companies build in exceptions. Certain plans allow RSUs to continue vesting after retirement (if you meet age and tenure conditions), or accelerate vesting following events like an acquisition or change in control. Some employers also negotiate accelerated vesting as part of an exit package, particularly for senior employees. None of this is guaranteed. Read your specific grant agreement and separation terms rather than assuming a standard outcome.
What happens to RSUs that already vested
If your RSUs have already vested before you leave, leaving your employer has no impact on their tax treatment. Once RSUs vest, they become regular company shares that you own outright, just like any other stock in your brokerage account.
You already paid tax on them at vesting, when their fair market value was treated as a perquisite and taxed as part of your salary income. Leaving your job doesn't undo that or create any new tax event.
From here, the next taxable event only happens when you sell the shares. The math doesn't change because you're no longer employed there:
- Capital gain or loss equals the sale price minus your cost basis, where the cost basis is the FMV on the vesting date that was already taxed as salary.
- Shares sold within 24 months of vesting are short-term capital gains, taxed at your income slab rate.
- Shares held beyond 24 months from vesting are long-term capital gains, taxed at 12.5%, without indexation.
- Foreign RSU shares, including those from a US employer, continue to be treated as unlisted equity shares/securities for Indian tax purposes, regardless of whether you still work there.
You can hold these shares indefinitely, sell them immediately, or fold them into your wider portfolio.
The cliff date is where the real cost sits
Because unvested shares are forfeited in full and vested shares are unaffected, the financial cost of leaving is concentrated entirely around your vesting dates, especially your cliff date (the first date any shares vest at all). Leave one day before a vesting date and you forfeit that tranche completely. Leave one day after, and it's yours regardless of what happens next.
Example
Suppose you are granted 800 RSUs on a schedule vesting over four years with a one-year cliff, a common structure where 25% of the grant vests on the first anniversary and the rest vests in smaller tranches after that (the exact split can vary by company, so check your own grant agreement).
That means 200 shares are due to vest on your cliff date. You get a competing offer and your last possible working day would fall two weeks before that cliff date. The stock is trading at $180 per share on the day you're deciding, and you're converting at an illustrative SBI TT buying rate of ₹88/USD.
| Item | Value |
|---|---|
| Shares in the cliff tranche | 200 |
| FMV per share (illustrative) | $180 |
| Value in USD | $36,000 |
| Exchange rate (illustrative SBI TT buying rate) | ₹88/USD |
| Total forfeited value | ₹31,68,000 |
The result: leaving two weeks before your cliff date costs you the entire ₹31.68 lakh cliff tranche, not a pro-rated slice of it, because none of that tranche has vested yet.
If you instead hold on for those two weeks and let the cliff hit, those 200 shares vest, get taxed as salary income at that point, and become fully yours to keep, sell, or hold, with any future price movement taxed only as a capital gain when you sell.
What ends the day you leave: employer sell-to-cover TDS
While you're employed and RSUs are vesting, your employer is required to withhold tax at vesting, most commonly through sell-to-cover, where the employer or broker automatically sells enough of your newly-vested shares to cover the estimated tax and credits you with the rest.
This is deducted as TDS under Section 192 of the Income-tax Act. Some employers may instead deduct the estimated tax directly from your salary rather than selling shares. Either way, this TDS shows up in your Form 16 and can be claimed as tax already paid when you file your return.
Since unvested RSUs are forfeited, there are no more vesting events left at that employer, and therefore no more sell-to-cover transactions or Section 192 withholding from them going forward. Your former employer's payroll stops being involved in your equity taxes entirely.
This does not mean your tax obligations end. Sell-to-cover only ever withheld tax on the salary/perquisite portion at vesting, never on capital gains from a later sale. That was always something you had to account for yourself.
If you sell already-vested shares after leaving and the resulting capital gain (combined with your other tax liability for the year) exceeds ₹10,000, you are legally required to pay advance tax on it yourself, in installments through the year, since there's no employer left to withhold it for you.
Your reporting obligations also don't disappear. If your vested shares are still sitting in a foreign brokerage account, they remain reportable in Schedule FA regardless of your employment status. The obligation to disclose starts on the date the shares vest and land in your brokerage account, and continues for as long as you hold them; only unvested RSUs are excluded from Schedule FA, since you never owned those shares.
If it's not you leaving, but your company being acquired
Everything above assumes a normal resignation, layoff, or termination. An acquisition or merger changes the picture, because your unvested RSUs may not simply be forfeited; what happens to them is set by the deal terms and your equity plan.
Some companies build in special provisions that accelerate vesting on an acquisition or change in control, and when that acceleration happens, the shares are taxed as salary income at the point they vest, exactly like a normal vesting event.
The three structures below are widely used industry termsy. Treat any specific percentages, timelines, or eligibility rules as something to confirm from your own grant agreement and the acquisition's deal documents, not from this post.
- Single-trigger acceleration: unvested RSUs accelerate and vest immediately on the acquisition or change-in-control event alone, with no second condition required.
- Double-trigger acceleration: acceleration requires two events, typically both the acquisition or change in control and a second event afterward (commonly your role being eliminated or you being terminated without cause within a defined window after the deal closes).
This is the more common structure at venture-backed and public tech companies, since it protects the acquirer from losing key employees the moment the deal closes while still protecting employees who are let go because of the deal.
- Substitution (or assumption): instead of accelerating vesting, the acquirer converts your unvested RSUs into equivalent RSUs of the acquiring company, and you continue vesting on the same or an adjusted schedule under the new employer.
No acceleration or extra tax event occurs at the time of the deal itself; ordinary vesting-then-sale tax treatment continues to apply once the substituted RSUs vest.
Whichever structure applies to your grant, once vesting is triggered (whether on the original schedule, accelerated, or under substituted RSUs), the same rules from sections 1 to 4 above apply: the FMV at vesting is taxed as salary, sell-to-cover or salary withholding applies at that employer while you're still there, and any subsequent sale is a capital gain or loss measured from that vesting-date FMV.
A 30-day checklist for after you leave
- Pull your final vesting and grant statement from your equity plan portal before your access is revoked, so you have a permanent record of exactly what vested, when, and at what FMV, and what was forfeited.
- Confirm your last vesting date with your employer or plan administrator in writing, especially if your departure date falls close to a cliff or vest date; a day's difference can be worth lakhs, as shown in the example above.
- Check your Form 16 once issued, to confirm the TDS withheld on your final vesting events under Section 192 is correctly reflected, since you'll need this figure to claim credit when filing your return.
- Keep your cost-basis records for every vesting lot you still hold (FMV and exchange rate on each vesting date), since each lot is tracked separately for capital gains when you eventually sell.
- Check whether your vested shares are still reportable in Schedule FA for the relevant year; they are, for as long as you hold them, regardless of employment status.
- Estimate whether you'll owe advance tax on any capital gains if you plan to sell vested shares while between jobs or after joining a new employer.
- Read your acquisition or severance paperwork closely, if relevant, for any acceleration or substitution clause before assuming standard forfeiture rules apply.
Exact portal access windows, how many days after your last working day you can still log into your stock plan account to download statements, vary by broker and employer. Check directly with your stock plan administrator (Fidelity, E*TRADE, Schwab, or similar) before access is cut off.
