Foreign Company RSUs in India (2026): How Vesting, Sell-to-Cover and Schedule FA Actually Work
By the CreditSmart editorial team, reviewed by a practising CA · September 2026
The 30-second version
RSUs from a US or foreign-listed employer are taxed twice: the full market value at vesting is salary at your slab (that’s why ~30% of shares vanish as sell-to-cover), and the growth after vesting is capital gains when you sell — with foreign shares needing 24 months for the 12.5% long-term rate. And every year you hold even one foreign share, Schedule FA disclosure is mandatory — missing it is a Black Money Act exposure with ₹10 lakh-per-year penalties.
Tax event #1 — vesting (not grant)
Unlike ESOPs, RSUs need no exercise and no purchase price. On each vesting date the shares are simply delivered — and their full market value on that date is taxed as a salary perquisite at your slab rate:
Perquisite = FMV on vesting date × shares vested, converted to ₹ at the prescribed SBI TT buying rate. 100 shares vesting at $150 with USD/INR at 88 = ₹13.2 lakh added to that month’s taxable salary — sold or not.
Your Indian employer runs TDS on this through payroll, which is why a big vest month shows a shockingly small net salary.
Sell-to-cover: why fewer shares reach your account
Most foreign plans auto-sell a slice of every vest — typically around 30% — to fund the withholding. If 100 shares vest, ~70 hit your brokerage. Verify three things each vest:
- The payslip perquisite reflects all 100 shares, not 70.
- The sell-to-cover sale is itself a share sale — its (small) gain or loss between vest FMV and sale price belongs in your ITR.
- The broker vest confirmation is your cost-basis proof forever — archive it.
Tax event #2 — capital gains when you sell
Foreign listed shares follow the unlisted-shares schedule in India:
| Holding (from vest date) | Type | Rate |
|---|---|---|
| More than 24 months | LTCG | 12.5% (no indexation) |
| 24 months or less | STCG | Your slab rate |
The gain is sale price − vest-date FMV (that FMV was already taxed as salary). US capital gains tax generally doesn’t apply to Indian-resident sellers, so gains aren’t double-taxed — dividends are the double-tax case.
Dividends and the DTAA credit
US dividends suffer 25% US withholding and Indian slab tax. The fix: Form 67 filed before your ITR claims Foreign Tax Credit for the US withholding. Mechanics of treaty relief: our DTAA guide.
Schedule FA — where the real damage happens
Every year you hold foreign shares — even one unsold RSU share, even at a loss — Schedule FA in ITR-2/ITR-3 must disclose the asset and the foreign brokerage account (peak balance, closing balance, income). Non-disclosure falls under the Black Money Act: ₹10 lakh per year of penalty exposure, independent of tax owed. India receives your US brokerage data under FATCA/CRS automatically — this is the most expensive RSU mistake in practice.
The RSU checklist
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- Every vest: confirm full FMV on payslip/Form 16; archive the broker statement and ₹ rate.
- Report the sell-to-cover sale, however small.
- Selling? Count 24 months from the vest date, not grant.
- Dividends: Form 67 before the ITR for the US credit.
- Schedule FA every year you hold anything foreign — ITR-2/3 only, never ITR-1.
- Left the company? The brokerage account still exists — FA disclosure continues until empty and closed.
FAQs
My RSUs vested but I sold nothing. Do I still pay tax?
Yes — vesting itself is salary income, taxed through payroll TDS.
Do foreign RSUs get the startup ESOP deferral?
No — that belongs to 80-IAC-certified Indian startups. See our ESOP taxation guide.
Which ITR form?
ITR-2, or ITR-3 with business income. Foreign assets rule out ITR-1.
I forgot Schedule FA last year. Now what?
Correct it through a revised/updated return where the window allows, with a CA — voluntary correction is treated far better than discovery.
Related: ESOP taxation & the 5-year deferral · ESOP vs RSU mechanics · US stocks from India
General information, not tax advice. Cross-border equity outcomes depend on plan, dates and residency — consult your CA.
Credit Smart India · IG: @creditsmart.in · FB/YT: @creditsmartindia · Last updated: September 2026