Heads up. Tax rules change. Confirm the details with a chartered accountant before you act.
The short version
RSU income gets taxed twice. First, the value of the shares on vest day is taxed as salary. Later, when you sell, the growth since vesting is taxed as capital gains. This guide is for people who are tax residents of India.
Stage 1: vest day, when the tax bill shows up
- The perquisite is the market value of the shares on the vest date, times the number of units, converted to rupees. It is taxed as salary (Section 17(2)(vi) of the Income-tax Act, 1961, which is renumbered under the Income-tax Act, 2025).
- Your employer deducts TDS on it under Section 192. Most US employers do this through sell-to-cover.
- You’re taxed at vesting even if you keep every share.
- The taxable value is fixed on the vest date. If the share price drops afterwards, your tax doesn’t drop with it.
Which exchange rate?
Foreign values are converted to rupees using the SBI telegraphic transfer buying rate (TTBR). Published guides disagree on which date’s rate applies at vesting: the vesting date itself, or the last day of the previous month. Check with your payroll team or CA.
A worked example
This is an illustration, not a forecast.
| Step | Figure |
|---|---|
| Units vesting | 100 |
| Share price on vest date | $150 |
| USD/INR rate | ₹97 |
| Value of one share | ₹14,550 |
| On paper (perquisite value) | ₹14,55,000 |
| Tax at 31.2% (30% slab plus 4% cess) | ₹4,53,960 |
| Shares sold to cover (rounded up) | 32 |
| Shares you keep | 68 |
The cost basis of each share is its value on the vest date, ₹14,550 here. Plug in your own numbers with the sell-to-cover calculator.
Stage 2: when you sell
- Your gain is the sale proceeds, converted to rupees, minus the vest-date value of those shares.
- Shares of US-listed companies aren’t listed in India, so guides treat them as unlisted securities. That means the holding period counts from the vest date, with a 24-month threshold.
- Guides report that gains on shares held for more than 24 months are taxed at 12.5% without indexation, and shorter holds are taxed at your slab rate.
- The tax you paid at vesting can’t be set off against capital gains tax. They’re separate events.
See where a sale falls with the holding period checker.
Mistakes people make
- Selling between 12 and 23 months after vesting and expecting the lower long-term rate.
- Forgetting to report the shares in Schedule FA. Here’s the Schedule FA guide.
- Treating TDS as the final tax and missing a shortfall.