RSUs from a US employer: tax at vest and at sale in India

Two taxes, two rulebooks

Restricted stock units from a US parent company feel like one thing: shares that turn up in a brokerage account every quarter. Indian tax treats them as two separate events, under two different heads of income, converted at two different exchange rates.

The first event is the vest. The second is the sale. Most of the mistakes people make come from treating the second one like an Indian share sale, which it is not. The general rules are in our guide to ESOP, RSU and ESPP taxation; this post runs the numbers for a resident employee of a US company in FY 2026-27, with real exchange rates.

At vest: salary, in rupees

When an RSU vests you pay nothing for it, so its whole market value is a perquisite. It is added to your salary, taxed at your slab rate, and your Indian employer deducts the tax through payroll. The dollar value is converted at the SBI telegraphic-transfer buying rate on the vest date, which is the figure your Form 16 will carry.

Take an employee with a gross salary of ₹30 lakh under the new regime. On 1 October 2026, 100 RSUs vest at $150 a share. The rupee stood at ₹96.22 to the dollar that day on our currency data, a market reference rate; the SBI buying rate is a little lower, so treat the figures as illustrative.

The extra tax is exactly 31.2% of the perquisite, because the salary already sits in the 30% slab and cess adds 4%. That is roughly 31 of the 100 shares. Most US plans "sell to cover", selling about that many on the vest date so the payroll tax can be funded, which leaves about 69 shares in the account. The income tax calculator shows the slab arithmetic, and the RSU and ESPP tax calculator runs both events together.

An employee share purchase plan works the same way, with a smaller perquisite. Buy 40 shares at a 15% discount, $127.50 against a market price of $150, and the perquisite is only the discount: 40 × $22.50 × ₹96.2248 = ₹86,602, taxed at the same 31.2%, or ₹27,020.

At sale: foreign shares are "unlisted" here

Indian tax law does not care that Nasdaq is liquid. A share not listed on an Indian exchange is an unlisted share for these purposes, so three of the familiar equity rules switch off:

• It turns long-term only after more than 24 months, not 12.
• Long-term gains are taxed at 12.5% from the first rupee. The ₹1.25 lakh yearly exemption applies only to Indian listed equity and equity funds.
• Short-term gains are taxed at your slab rate, not the 20% that applies to short-term gains on Indian exchanges.

The cost of each share is its rupee value on the vest date, the same figure that was taxed as salary. The sale price converts at the SBI buying rate on the last day of the month before the sale.

Now the part that surprises people. Suppose the employee also holds two older lots of 100 shares each, one vested on 1 October 2024 and one on 1 April 2025, both at $150. On 9 October 2026 she sells both, at $150. In dollars, nothing happened. In rupees, the dollar went from ₹83.87 and ₹85.61 to ₹95.93 on 30 September 2026.

That is ₹71,791 of tax on shares that ended where they started in dollars. The dollar rose 14.4% against the rupee over Lot A's holding and 12.1% over Lot B's, and that move is a taxable gain for an Indian resident. It runs the other way too: a rupee that strengthens can turn a dollar gain into a smaller rupee one. The capital gains tax calculator treats foreign shares under the same rules.

Two things follow. Lot B, sold six months short of the 24-month line, paid more than twice Lot A's tax on a smaller gain. And no Indian TDS is deducted on these gains, so they usually need advance tax. Our post on advance tax on capital gains covers when it falls due, and the advance tax calculator works out the interest on a late instalment; the last one for this year is due on 15 March 2027.

The reporting duty that does not care about tax

A resident who holds any foreign asset must list it in Schedule FA of the return. There is no threshold: one share held for one day counts, as does the cash balance in the US brokerage account and shares sold to cover tax. Schedule FA runs on the calendar year, so the return for FY 2026-27 reports what you held at any point in calendar year 2026, not April to March.

Leaving it out is expensive. The Black Money Act provides a penalty of ₹10 lakh for each year of non-disclosure, with a limited exception where total foreign movable assets stay under ₹20 lakh. That is a separate exposure from any tax owed.

Dividends add one more form. US companies withhold 25% from an Indian individual shareholder's dividends. You can claim that as a foreign tax credit, but only by filing Form 67 before the return, reporting the income in Schedule FSI and claiming the credit in Schedule TR. Our post on dividend tax covers the Indian side. Form 67 and the schedules are on the Income Tax e-filing portal.

Where it goes wrong

1. Using the purchase price as cost. For an RSU you paid nothing, but your cost is the vest-date rupee value. Using zero taxes the whole value a second time.
2. Counting 12 months. A US share sold at 13 months is short-term here, at your slab.
3. Claiming the ₹1.25 lakh exemption. It does not apply to foreign shares at all.
4. Ignoring the currency. A rupee that weakens creates taxable gains even if the share price is flat. The same effect drives returns in international funds.
5. Missing Schedule FA because the shares were sold before March.

There is also a portfolio question. Salary and vested shares both depend on the same employer. Some people diversify after each vest, into broad funds such as those in the overseas fund-of-funds category or index funds like the Motilal Oswal S&P 500 Index Fund; others do not. The tax itself is not a reason either way, and asset allocation is the better frame.

What this example does not show

The exchange rates here are market reference rates, not the SBI buying rates your Form 16 and return must use, so real figures will differ slightly. The example has no surcharge because total income stays under ₹50 lakh. It ignores US estate-tax exposure and treaty questions, which a few holders with large balances should take up with a tax adviser. None of this is tax advice or a recommendation to hold or sell any share.