Restricted Stock Units, better known as RSUs, have quietly become one of the most common ways Indian professionals get paid. If you work for a technology company, a bank, a global capability centre or a fast growing startup, there is a fair chance that a slice of your pay lands in your account as shares rather than cash. The twist is that RSUs are taxed twice, once when they vest and again when you sell, and the rules shift depending on whether the shares belong to a listed Indian company, an unlisted Indian company or a foreign company. Throw in the arrival of the new Income Tax Act, 2025 and it is easy to feel lost.
This guide walks you through all of it in plain language, with every relevant section and rule quoted, so you know exactly what you owe and when. Throughout, we assume you are a resident and ordinarily resident individual in India. That single fact carries weight, because a resident is taxed in India on worldwide income, which is precisely why your foreign RSUs sit firmly inside the Indian tax net.
1. What Is an RSU?
An RSU is a promise from your employer to give you a set number of company shares at a future date, provided you stay on and meet the conditions attached to the grant. You pay nothing, or next to nothing, for these shares. The promise is made on the grant date, but nothing reaches your hands then. The shares are handed over only on the vesting date, once the waiting period is over. That is the moment your RSU turns from a promise into real, owned shares.
It helps to keep three dates straight. The grant date is when your employer makes the promise. The vesting date is when the shares are actually allotted to you and become yours. The sale date is when you choose to sell those shares. Tax law ignores the grant date completely. All the action happens on the vesting date, and then again on the sale date.
RSU, ESOP and ESPP are cousins, not twins
People often use these three terms interchangeably, but they are not the same. Under an ESOP you get an option to buy shares at a fixed exercise price, and you decide when to exercise. Under an ESPP you buy shares, usually at a discount, through payroll deductions. An RSU is the simplest of the three. There is no price to pay and no option to exercise. Once it vests, the share is yours. Because there is nothing to pay, the entire value of the share on the vesting date becomes your income. Hold on to that idea, because it is the heart of how RSUs are taxed.
For tax purposes, RSUs belong to the same family as ESOPs. The law speaks of specified securities and sweat equity shares, and RSUs are covered by that language. So when you read section 17(2)(vi) of the Income Tax Act, 1961, or its successor in the 2025 Act, take it that RSUs sit squarely inside it.
The two moments the taxman shows up
There are exactly two points at which tax is triggered. The first is at vesting, when the value of the shares is taxed as salary. The second is at sale, when any rise in value after vesting is taxed as capital gains. Getting these two stages right, and not mixing them up, is the whole game. The rest of this guide takes them one at a time.
2. Stage One: Tax When Your RSU Vests
On the day your RSU vests, you receive something of value from your employer without paying for it. The law treats this benefit as a perquisite, which is simply a non cash benefit that comes with your job. That perquisite is added to your salary and taxed at your normal slab rate in the year of vesting.
The governing provisions
Under the Income Tax Act, 1961, this is governed by section 17(2)(vi), which brings the value of any specified security or sweat equity share allotted to you, free of cost or at a concessional rate, within the meaning of perquisite. The method of valuing that perquisite is laid down in Rule 3(8) and Rule 3(9) of the Income Tax Rules, 1962.
Under the Income Tax Act, 2025, the same treatment is carried forward. Perquisite is defined in section 17(1)(d) read with the valuation mechanism in section 17(5)(h), which continues to tax the fair market value of the shares on the vesting date, reduced by whatever you paid. For a plain RSU, where you pay nothing, the whole fair market value is your perquisite.
The perquisite is worked out with a simple formula:
Since an RSU usually costs you nothing, that first bracket is just the fair market value, and the perquisite is the fair market value on the vesting date multiplied by the number of shares vested.
Finding the fair market value: three situations
a) The issuing company is a listed Indian company
When the shares belong to an Indian company listed on a recognised Indian stock exchange, valuation is easy because a live market price exists. Rule 3(8)(i) says the fair market value is the average of the opening price and the closing price of the share on that stock exchange on the vesting date. If the share is listed on more than one exchange, you take the exchange that recorded the highest trading volume that day. If there was no trading on the vesting date, you take the closing price on the nearest earlier date on which it was traded. Since the price is already in rupees, there is no currency conversion to worry about.
b) The issuing company is an unlisted Indian company
When the shares belong to an unlisted Indian company, and this covers most startups and privately held firms, there is no market price to look up. Rule 3(8)(iii) steps in. The fair market value has to be determined by a merchant banker registered with SEBI. The valuation must be done as on the vesting date, or on a date no earlier than 180 days before the vesting date, so the report cannot be stale. That certified value becomes your perquisite base. Once again the value is in rupees, so no conversion is needed.
c) The issuing company is a foreign company
This is where it gets interesting. When the shares belong to a foreign company, say a US parent whose shares trade on the NASDAQ, they are not listed on any recognised Indian stock exchange. Read strictly, Rule 3(8)(iii) would call for a merchant banker valuation here too. In everyday practice, however, because these shares carry a genuine and readily available quoted price on the foreign exchange, employers and advisors use the market price on the foreign exchange on the vesting date as the fair market value, and this is widely accepted as a fair reflection of value. Whichever route is used, the figure is in a foreign currency and must be converted into rupees before it can be taxed. That brings us to the conversion rules.
Turning dollars into rupees: the conversion rules
Two rules govern how a foreign currency figure becomes a rupee figure, and both use the telegraphic transfer buying rate of the State Bank of India, which is simply the rate at which SBI buys foreign currency.
Rule 115 of the Income Tax Rules, 1962 tells you which date's rate to use when you compute your income. For salary, and the RSU perquisite is salary, the rule points to the telegraphic transfer buying rate on the last day of the month immediately before the month in which the salary becomes due or is paid. So if your RSU vests in August, you use the SBI rate as on 31 July.
Rule 26 comes into play for the tax your employer deducts at source. It uses the telegraphic transfer buying rate on the date the tax is actually required to be deducted. Because vesting, valuation and payroll usually fall in the same month, the two rates sit close together, though they are not always identical, which is why your Form 16 figure and your own calculation can differ by a little.
The 2025 Act keeps this framework intact. The conversion still runs on the SBI telegraphic transfer buying rate, and the corresponding rules under the 2025 regime carry the same logic forward. In short, the mechanics of turning dollars into rupees have not changed.
Your employer deducts tax at vesting
Your employer is legally bound to deduct tax at source on the RSU perquisite. Under the Income Tax Act, 1961 this sits under section 192, the section that governs tax deduction from salary. Under the Income Tax Act, 2025 the same duty appears as section 393. In most companies the tax is recovered either by selling a portion of your vested shares, often called sell to cover, or by deducting from your monthly salary. Either way, the perquisite and the tax on it will show up in your Form 16 and Form 26AS, so check that they match your own numbers.
One relief is worth flagging. If the shares come from an eligible startup recognised by the DPIIT, the tax on the vesting perquisite can be deferred, broadly until the earliest of five years from vesting, the date you leave the company, or the date you sell the shares. This deferral, introduced by section 192(1C) of the 1961 Act, continues under the 2025 Act. It does not reduce the tax, it only postpones it.
3. Stage Two: Tax When You Sell the Shares
Selling your vested shares is a completely separate event from vesting. When you sell, the profit you make over and above the value that was already taxed at vesting is treated as a capital gain. This is charged under section 45 of the Income Tax Act, 1961, or section 67 of the Income Tax Act, 2025, and the gain is computed under section 48 of the 1961 Act, now section 72 of the 2025 Act.
The cost that stops double taxation
Here is the taxpayer friendly part that keeps the same money from being taxed twice. When you sell, your cost of acquisition is not zero, even though the RSU cost you nothing. The law treats the fair market value that was already taxed as a perquisite on the vesting date as your cost. This is spelt out in section 49(2AA) of the 1961 Act and carried into Sl.No.4 in Table specified in section 73(1) of the 2025 Act. So you pay capital gains tax only on the increase in value after vesting, not on the whole sale price.
Short term or long term? Count from the vesting date
Whether your gain is short term or long term depends on how long you hold the shares, counted from the vesting date, which is the date the shares were allotted to you, up to the date you sell. The grant date is irrelevant, and so is any earlier option date. The clock starts at vesting.
The holding period lines were simplified by the Finance Act, 2024 and are now clean. For listed Indian equity shares, holding for more than 12 months makes the gain long term. For everything else, which includes unlisted Indian shares and foreign shares, you need more than 24 months to be long term. Anything shorter is short term. The definitions live in section 2(42A) of the 1961 Act, with the long term capital asset defined in section 2(29A). Under the 2025 Act, the long term capital asset is defined in section 2(67), holding the same 12 month and 24 month lines.
Quick reference: rates on sale
| Type of shares | Long term if held for | Short term gain is taxed | Long term gain is taxed |
|---|---|---|---|
| Listed Indian shares (sold on an Indian exchange, STT paid) | more than 12 months | 20% under sec 111A (2025: sec 196) | 12.5% above Rs 1,25,000 under sec 112A (2025: sec 198) |
| Unlisted Indian shares | more than 24 months | your slab rate | 12.5% under sec 112 (2025: sec 197) |
| Foreign company shares | more than 24 months | your slab rate | 12.5% under sec 112 (2025: sec 197) |
A quick note on the extras: long term gains taxed at 12.5% carry no indexation benefit for transfers on or after 23 July 2024, a 4% health and education cess applies on top of every figure below, and the surcharge, where applicable, on capital gains is capped at 15%.
a) Selling shares of a listed Indian company
When you sell listed Indian shares on a recognised Indian stock exchange, securities transaction tax is paid on the sale, and this unlocks the concessional capital gains regime. Held for 12 months or less, the gain is short term and taxed under section 111A at a flat 20%, a rate that applies to sales made on or after 23 July 2024. Under the 2025 Act the same provision is renumbered as section 196. Held for more than 12 months, the gain is long term and taxed under section 112A: the first Rs 1,25,000 of such gains in a year is exempt and the balance is taxed at 12.5% without indexation. Under the 2025 Act this becomes section 198. Everything is already in rupees, so no conversion arises.
b) Selling shares of an unlisted Indian company
When you sell unlisted Indian shares there is no securities transaction tax and no stock exchange involved, so the concessional regime does not apply. Held for 24 months or less, the gain is short term and simply added to your total income, taxed at your normal slab rate, which can reach 30% plus surcharge and cess. Held for more than 24 months, the gain is long term and taxed under section 112 of the 1961 Act at 12.5% without indexation for transfers on or after 23 July 2024, which is section 197 under the 2025 Act. The Rs 1,25,000 exemption does not apply here, since that relief is reserved for listed equity under section 112A.
c) Selling shares of a foreign company
Foreign shares are treated as ordinary capital assets, not as listed equity, because no Indian securities transaction tax is paid on them. So even though your foreign shares may be actively traded on a foreign exchange, for Indian tax they follow the same pattern as unlisted shares. Held for 24 months or less, the gain is short term and taxed at your slab rate. Held for more than 24 months, the gain is long term and taxed under section 112, now section 197, at 12.5% without indexation. The Rs 1,25,000 exemption is not available. Sections 111A, 112A, 196 and 198 simply do not touch foreign shares.
Converting the foreign sale into rupees
Since your foreign shares were bought and sold in a foreign currency, you again convert to rupees, and the good news is that half the work is already done. Your cost of acquisition is the rupee value that was taxed as a perquisite at vesting, so it is already fixed in rupees and you carry it forward as is. For the sale side, Rule 115 tells you to use the SBI telegraphic transfer buying rate on the last day of the month immediately before the month in which you sell. So a sale in March uses the rate as on the last day of February. The gain is simply the rupee sale value minus the rupee cost.
One technical point worth knowing. There is a special rule, the first proviso to section 48, which forces a foreign currency computation for certain shares. That rule applies only to non residents holding shares of an Indian company. Since you are a resident selling foreign shares, it does not apply to you, and your gain is computed straightforwardly in rupees as described above. The 2025 Act preserves this position within section 72.
4. The Income Tax Act, 1961 versus the Income Tax Act, 2025: What Actually Changed?
If you have made it this far you may be bracing for a long list of changes brought in by the Income Tax Act, 2025. Here is the honest answer. For RSU taxation, almost nothing of substance has changed. The 2025 Act is largely a cleanup and renumbering exercise. It replaces old fashioned language, swaps the twin ideas of previous year and assessment year for the single idea of a tax year, and gives every provision a fresh number. The core logic stays put: the two stage taxation, the perquisite at vesting, the capital gain at sale, the valuation rules, the holding periods and the tax rates all carry over unchanged.
| What it does | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| RSU value taxed as a perquisite at vesting | Section 17(2)(vi) | Section 17(1)(d) with 17(5)(h) |
| Charging of salary income | Section 15 | Section 15 |
| TDS on the salary perquisite | Section 192 | Section 393 |
| Startup deferral of the perquisite tax | Section 192(1C) | Retained under the 2025 Act |
| Valuation of the perquisite (fair market value) | Rule 3(8) and Rule 3(9) | Same valuation logic, 2026 Rules |
| Currency conversion of income | Rule 115 (SBI TT buying rate) | Same logic, 2026 Rules |
| Charging of capital gains | Section 45 | Section 67 |
| Computation of capital gains | Section 48 | Section 72 |
| Cost of acquisition equals FMV taxed at vesting | Section 49(2AA) | Section 73 |
| Short term capital asset defined | Section 2(42A) | Section 2(101) |
| Long term capital asset defined | Section 2(29A) | Section 2(67) |
| STCG on listed equity, STT paid, at 20% | Section 111A | Section 196 |
| LTCG, general, at 12.5% | Section 112 | Section 197 |
| LTCG on listed equity above Rs 1.25 lakh at 12.5% | Section 112A | Section 198 |
Read the table and a single message jumps out. Section 111A became section 196, section 112 became section 197, section 112A became section 198, section 45 became section 67, section 48 became section 72, and section 49(2AA) became section 73. The numbers moved, the meaning did not. The 20% short term rate, the 12.5% long term rate, the Rs 1,25,000 exemption for listed equity, the 12 month and 24 month holding periods, and the two stage structure are identical under both Acts.
So if you were worried that the 2025 Act has rewritten the rules for your RSUs, you can relax. There is no change in the way your RSUs are taxed. The one thing to watch is the effective date. The 2025 Act applies from the tax year 2026 to 2027 onwards, so vesting and sales up to 31 March 2026 are still described using the 1961 Act numbers, while those from 1 April 2026 use the 2025 Act numbers. Same tax, different label.
5. One Example, Every Scenario: Meet Arjun Mehta
Numbers make all of this concrete, so meet Arjun Mehta, a resident and ordinarily resident software professional in Bengaluru who sits in the 30% tax bracket. Arjun holds RSUs from three different companies, which conveniently lets us walk through all three situations, listed Indian, unlisted Indian and foreign, and watch both short term and long term sales play out. To keep the focus on the concepts, we show the taxable amount and the rate that applies, remember that a 4% health and education cess is added on top, and that surcharge, where relevant, is capped at 15% for capital gains.
Scenario A: RSUs of Infytech Ltd, a listed Indian company (NSE)
At vesting. Arjun is granted 1,000 RSUs of Infytech Ltd. They vest on 10 May 2025, when the share opens at Rs 490 and closes at Rs 510. The fair market value under Rule 3(8)(i) is the average, Rs 500. Since the RSUs cost him nothing, his perquisite is Rs 500 × 1,000 = Rs 5,00,000, added to his salary for the year 2025 to 2026 and taxed at 30%, with tax deducted under section 192. His cost of acquisition for the future, under section 49(2AA), is locked in at Rs 500 a share.
Short term sale. On 10 November 2025, about six months after vesting, Arjun sells 400 of these shares on the NSE at Rs 650. Held for under 12 months, this is a short term gain of (650 − 500) × 400 = Rs 60,000. Taxed under section 111A at 20%, the tax is Rs 12,000, plus cess.
Long term sale. On 20 July 2026, more than 12 months after vesting, he sells the remaining 600 shares at Rs 800. This is a long term gain of (800 − 500) × 600 = Rs 1,80,000. Under section 112A the first Rs 1,25,000 is exempt, leaving Rs 55,000 taxable at 12.5%, which is Rs 6,875, plus cess. This July 2026 sale falls under the 2025 Act, so on his return the same relief is quoted as section 198.
Scenario B: RSUs of StartNow Pvt Ltd, an unlisted Indian company
At vesting. Arjun also holds 2,000 RSUs of StartNow Pvt Ltd, an unlisted Indian startup, vesting on 15 June 2025. With no market price available, a SEBI registered Category I merchant banker values the shares under Rule 3(8)(ii) at Rs 200 each, using a valuation dated within 180 days of vesting. His perquisite is Rs 200 × 2,000 = Rs 4,00,000, taxed as salary. His cost of acquisition is fixed at Rs 200 a share.
Long term sale. Arjun holds patiently and sells all 2,000 shares on 20 August 2027, more than 24 months after vesting, at Rs 500. Because unlisted shares need more than 24 months to turn long term, this is a long term gain of (500 − 200) × 2,000 = Rs 6,00,000, taxed under section 112, now section 197, at 12.5%, which is Rs 75,000, plus cess. There is no Rs 1,25,000 exemption here, since that belongs only to listed equity.
What if he had sold sooner? Had Arjun sold within 24 months, say in January 2026, the entire Rs 6,00,000 gain would have been short term, added to his income and taxed at his 30% slab, costing Rs 1,80,000 plus cess, far more than the long term route. Patience paid.
Scenario C: RSUs of GlobalTech Inc, a foreign company (NASDAQ, in USD)
At vesting, with conversion. Arjun holds 300 RSUs of GlobalTech Inc, a US company trading on the NASDAQ, vesting on 20 August 2025 when the share closes at USD 100. To convert this to rupees, Rule 115 for salary points to the SBI telegraphic transfer buying rate on the last day of the month before vesting, that is 31 July 2025. Suppose that rate is Rs 83 to the dollar. His perquisite is 300 × USD 100 × 83 = Rs 24,90,000, taxed as salary, with tax deducted under section 192. His cost of acquisition is now fixed in rupees at Rs 24,90,000, or Rs 8,300 a share.
Short term sale, with conversion. On 10 March 2026, about seven months after vesting, Arjun sells all 300 shares at USD 130. Foreign shares need more than 24 months to be long term, so this is short term. For the sale side, Rule 115 uses the SBI rate on the last day of the month before the sale, that is 28 February 2026. Suppose that rate is Rs 84. The sale value is 300 × USD 130 × 84 = Rs 32,76,000. His cost stays at Rs 24,90,000. The short term gain is Rs 7,86,000, added to his income and taxed at his 30% slab, costing about Rs 2,35,800 plus cess. Section 111A offers no help here, since no Indian securities transaction tax was paid.
What if he had held longer? Suppose instead Arjun had held beyond 24 months and sold in September 2027 at USD 160, with the SBI rate at Rs 85. The sale value would be 300 × USD 160 × 85 = Rs 40,80,000. The long term gain would be Rs 15,90,000, taxed under section 112, now section 197, at 12.5%, which is Rs 1,98,750 plus cess. Again, no Rs 1,25,000 exemption, because these are not listed Indian equity shares.
Arjun's tax at a glance
| Taxable event | Amount taxed | Nature and rate | Section (1961 / 2025) |
|---|---|---|---|
| Infytech, vesting | Rs 5,00,000 | Salary, slab 30% | 17(2)(vi), 192 / 17(1)(d), 393 |
| Infytech, sale of 400 (Nov 2025) | Rs 60,000 | Short term, 20% | 111A / 196 |
| Infytech, sale of 600 (Jul 2026) | Rs 55,000 | Long term, 12.5% (Rs 1.25L exempt) | 112A / 198 |
| StartNow, vesting | Rs 4,00,000 | Salary, slab 30% | 17(2)(vi), 192 / 17(1)(d), 393 |
| StartNow, sale (Aug 2027) | Rs 6,00,000 | Long term, 12.5% | 112 / 197 |
| GlobalTech, vesting | Rs 24,90,000 | Salary, slab 30% | 17(2)(vi), 192 / 17(1)(d), 393 |
| GlobalTech, sale (Mar 2026) | Rs 7,86,000 | Short term, slab 30% | 45, 48 / 67, 72 |
| GlobalTech, if sold after 24 months | Rs 15,90,000 | Long term, 12.5% | 112 / 197 |
6. Frequently Asked Questions
Q1. What exactly is an RSU?
A promise from your employer to give you company shares, free of cost, on a future vesting date, once you meet the conditions. On vesting the shares become yours, and that is when tax first bites.
Q2. Do I pay any tax when the RSU is granted?
No. The grant is only a promise, and nothing is taxed on the grant date. Tax begins at vesting.
Q3. Why are RSUs taxed twice?
Because two different things happen. At vesting you receive shares of value, taxed as salary. At sale you make a profit on those shares, taxed as capital gains. It is not true double taxation, because the value taxed at vesting becomes your cost when you sell, so the same rupee is not taxed twice.
Q4. What is taxed at vesting?
The fair market value of the shares on the vesting date, since an RSU costs you nothing. It is treated as a perquisite under section 17(2)(vi) of the 1961 Act, or section 17(1)(d) read with section 17(5)(h) of the 2025 Act, and taxed at your slab rate.
Q5. How is the fair market value found for listed Indian shares?
Under Rule 3(8)(i), it is the average of the opening and closing price of the share on the Indian stock exchange on the vesting date.
Q6. How is it found for unlisted Indian shares?
Under Rule 3(8)(ii) read with Rule 3(9), a SEBI registered Category I merchant banker values the shares, using a valuation not older than 180 days before the vesting date.
Q7. How is it found for foreign company shares?
Strictly, the same merchant banker route applies, because foreign shares are not listed on a recognised Indian exchange. In practice, since a live quoted price exists abroad, the market price on the foreign exchange on the vesting date is used and then converted to rupees.
Q8. Which exchange rate converts my foreign RSU value to rupees?
The SBI telegraphic transfer buying rate. Under Rule 115, for salary you use the rate on the last day of the month before the vesting month. For the tax your employer deducts, Rule 26 uses the rate on the date of deduction.
Q9. Does my employer deduct tax on the vesting perquisite?
Yes, under section 192 of the 1961 Act, section 393 of the 2025 Act. Often a few shares are sold to cover the tax, or it is taken from your salary. Always reconcile it with your Form 16 and Form 26AS.
Q10. When I sell, what is my cost of acquisition?
The fair market value that was taxed as a perquisite at vesting. This is set by section 49(2AA) of the 1961 Act, section 73 of the 2025 Act, so you are not taxed again on the vesting value.
Q11. From which date is my holding period counted?
From the vesting date, that is the date the shares were allotted to you, up to the sale date. The grant date does not count.
Q12. How long must I hold listed Indian shares for a long term gain?
More than 12 months.
Q13. How long for unlisted Indian shares or foreign shares?
More than 24 months. Anything up to 24 months is short term.
Q14. How are listed Indian shares taxed on sale?
Short term gains, held 12 months or less, at 20% under section 111A, which is section 196 in the 2025 Act. Long term gains, held more than 12 months, at 12.5% under section 112A, section 198, with the first Rs 1,25,000 in the year exempt.
Q15. How are unlisted Indian shares taxed on sale?
Short term gains, held 24 months or less, at your slab rate. Long term gains, held more than 24 months, at 12.5% under section 112, section 197, with no Rs 1,25,000 exemption.
Q16. How are foreign shares taxed on sale?
Just like unlisted shares. Short term at your slab rate, long term above 24 months at 12.5% under section 112, section 197. The concessional listed equity provisions do not apply, because no Indian securities transaction tax is paid.
Q17. Do I get the Rs 1,25,000 exemption on foreign or unlisted shares?
No. That exemption belongs only to listed equity taxed under section 112A, section 198.
Q18. What rate converts the sale of my foreign shares to rupees?
Under Rule 115, the SBI telegraphic transfer buying rate on the last day of the month before the sale month. Your cost stays at the rupee value fixed at vesting, so you only convert the sale side.
Q19. Has the Income Tax Act, 2025 changed how RSUs are taxed?
No, not in substance. The rates, holding periods, valuation and two stage structure are the same. Only the section numbers and some vocabulary changed, and the 2025 Act applies from the tax year 2026 to 2027 onwards.
Q20. What are the new section numbers I should know?
Perquisite, 17(2)(vi) becomes 17(1)(d) with 17(5)(h). Capital gains charge, 45 becomes 67. Computation, 48 becomes 72. Cost of acquisition, 49(2AA) becomes 73. Short term on listed equity, 111A becomes 196. Long term general, 112 becomes 197. Long term on listed equity, 112A becomes 198.
Q21. In Arjun's example, why was the November 2025 sale short term but the July 2026 sale long term?
Both lots of Infytech shares vested on 10 May 2025. The November 2025 sale came less than 12 months later, so it was short term at 20%. The July 2026 sale came more than 12 months later, so it was long term at 12.5%, with the Rs 1,25,000 exemption applied first.
Q22. In the example, how did Arjun's foreign perquisite of Rs 24,90,000 arise?
300 shares at USD 100 is USD 30,000. Converted at the SBI rate of Rs 83 for July 2025, that is Rs 24,90,000, taxed as salary at vesting. That same Rs 24,90,000 becomes his cost when he later sells.
Q23. In the example, why is Arjun's foreign share sale taxed at slab rate and not 20%?
Because foreign shares are not listed Indian equity and carry no Indian securities transaction tax, so section 111A does not apply. His March 2026 sale within 24 months is short term at his slab rate. Only a sale after 24 months would get the 12.5% long term rate, as the September 2027 illustration shows.
Q24. Do I have to report foreign RSUs and shares in my return, and can I claim credit for foreign tax?
Yes, on both. As a resident you must disclose your foreign shares and any foreign holdings in Schedule FA of your income tax return, and report the foreign income in Schedule FSI. If tax was withheld abroad on dividends or on the sale, you can usually claim a foreign tax credit under the relevant double taxation avoidance agreement by filing Form 67 before you file your return. Non disclosure of foreign assets carries heavy penalties, so this part is not optional.
A Final Word
RSUs are a genuinely rewarding form of pay, but the tax around them rewards planning. Track your vesting dates, keep your Form 16 and your merchant banker valuations safe, note the exchange rates on the right dates, and watch your holding periods so a sale does not slip from long term into short term by a few days. Do that, and the two stage system stops being intimidating and becomes predictable.
If you would like help mapping your own RSU grants, computing the perquisite and the capital gains, converting foreign values correctly, or reporting foreign shares in your return, the team at MNV Consulting would be glad to help.
Disclaimer. This article is for general information based on the law as it stands in July 2026, including the Income Tax Act, 1961, the Income Tax Act, 2025 and the amendments made by the Finance Act, 2024. It is not tax advice. Rates, rules and interpretations can change, and your own facts may lead to a different result, so we suggest you to consult us before you act. © MnV Consulting LLP