Wealth & Investment Planning

RSUs are taxed in two stages: at vest, the FMV on vest date is a perquisite under Section 17(2)(vi) taxed as salary with employer TDS; at sale, the gain over FMV at vest is capital gains. Ananya's 100 RSUs at $40 vest and $55 sale after 14 months show how the s.49(2AA) stepped-up cost prevents double taxation.

Any ESOP or RSU income makes ITR-1 invalid — capital gains and foreign assets require ITR-2 at minimum. The ITR-2 checklist: Schedule S for the perquisite, Schedule CG with cost at FMV under s.49(2AA), Schedule FA for foreign shares, Schedule TR for the foreign tax credit, and Form 67 filed before the ITR.

Employer TDS on an RSU perquisite may not cover your true tax at higher CTC bands. If total liability after TDS exceeds ₹10,000, pay advance tax on the shortfall by 15 March. Aisha's ₹8 lakh RSU vest against salary-only TDS shows the shortfall; interest under Section 234B applies if advance tax is below 90% of assessed tax.

ESOP perquisite = (FMV on exercise date − exercise price) × shares exercised, valued under Rule 3(8) of the Income-tax Rules. Vikram's 500 ESOPs at ₹100 exercise against ₹850 FMV produce a ₹3,75,000 perquisite reported in Form 16 Part B — and in Form 12BA when the perquisite exceeds ₹1 lakh.

Unvested RSUs have no specific CBDT guidance for Schedule FA — the conservative approach is to disclose them as a foreign asset at nil value. Vested but unsold shares must be reported with acquisition date, cost, and peak value. Non-disclosure attracts a ₹10 lakh penalty per asset per year under the Black Money Act.

When an employer withholds shares at vest to cover TDS, the tax paid covers only the perquisite — capital gains tax on the sale is separate. Reconcile using FMV at vest as your cost basis, check Form 26AS for TDS deposited, and pay the balance capital-gains tax via advance tax or self-assessment.

Section 49(2AA) sets the cost of acquisition of RSUs and ESOPs at the FMV on the allotment/vest date — the same value already taxed as a perquisite. This prevents double taxation: the capital gain is sale price minus FMV at vest, not the full sale price. Enter this cost in ITR-2 Schedule CG.

An ESPP's purchase discount is taxed as a perquisite at purchase: (FMV at purchase − ESPP price) × shares, under Section 17(2)(vi). The later sale is a separate capital gain using FMV at purchase as cost. Kavitha's $20 per-share discount is salary; her $30 gain six months later is short-term capital gains.

US withholding on RSU vest — typically 30% for non-resident aliens, reduced under the India-US DTAA — is reported on IRS Form 1042-S. In India, claim a foreign tax credit in Schedule TR and Form 67, limited to the lower of the Indian or foreign tax on that income. File Form 67 before the ITR due date.

US RSUs for Indian residents: convert vest-date FMV at the RBI/telegraphic-transfer buying rate to get the perquisite; the sale gain uses the same INR cost basis. Disclose foreign shares in Schedule FA at peak balance, and file Form 67 before the ITR due date to claim the foreign tax credit for US withholding.

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