Money Blog · RSU tax
RSU Tax in India: What You Pay at Vesting and What You Pay at Sale
If you work for a company that pays part of your compensation in RSUs, the tax shows up twice, at two different moments. People are usually surprised by the first one, because they owe tax on shares they haven't sold yet.
Stage 1: when the shares vest
On the vesting date, the market value of the shares you receive is treated as a perquisite, which is taxed as salary at your normal slab rate. Your employer deducts TDS on it. For example, if 100 units vest when each is worth ₹10,000, the perquisite is ₹10,00,000, added to your income for the year. At a high slab this is a large tax bill even though you haven't sold anything, so many employees sell part of the vest to cover it.
Stage 2: when you sell
Your cost for tax purposes is the value on the vesting date (the amount already taxed as salary). When you sell, only the difference between the sale price and that value is a capital gain. How it is taxed depends on how long you held the shares and what kind of shares they are.
| Shares | Held | Tax on the gain |
|---|---|---|
| Indian listed | 12 months or less | 20% |
| Indian listed | More than 12 months | 12.5% on gains above ₹1,25,000 a year |
| Foreign (unlisted in India) | 24 months or less | Your slab rate |
| Foreign (unlisted in India) | More than 24 months | 12.5%, no indexation |
Why the 24 months matters
Most employees of a foreign parent hold shares that are unlisted in India, so the long-term line is 24 months, not the 12 months many people expect. Continuing the example: if the shares sell for ₹14,000 each, the gain is ₹4,00,000. Sold after more than 24 months, the tax is about ₹50,000. Sold after 10 months, it is taxed at your slab rate, which at the 30% slab is about ₹1,24,800 with cess. The holding period is counted precisely, so selling a few days early can cost real money.
Currency and reporting
The values above are in rupees, converted using the exchange rates the tax rules prescribe, which your CA or employer's tax team can confirm. Foreign shares also have to be disclosed in your return. These details vary by case, so treat the numbers here as an illustration, not a filing.
This is general information for FY 2026-27, not tax advice. Rules and rates change, so confirm with a CA.
Frequently asked questions
When are RSUs taxed in India?
Twice. When they vest, the market value of the shares is taxed as salary at your slab rate, and your employer deducts TDS. When you later sell, the difference between the sale price and the value at vesting is taxed as capital gains.
How long must I hold foreign RSU shares for long-term treatment?
For unlisted foreign shares, the holding period must be more than 24 months from vesting. Gains on shares held longer are taxed at 12.5% without indexation. Shares held for up to 24 months are taxed at your slab rate.
What about shares of an Indian listed company?
Held for more than 12 months, gains are long-term and taxed at 12.5% above ₹1,25,000 of gains a year. Held for 12 months or less, gains are short-term and taxed at 20%.
Do I need to report foreign shares in my return?
Generally yes. Residents holding foreign assets are expected to disclose them in the return (Schedule FA). This is separate from the tax calculation, so ask a CA about the details.
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PayClever gives you an informational estimate, not tax, legal, or financial advice — check with a professional before acting on it.