Employees of multinational companies — especially in tech — often receive RSUs (Restricted Stock Units) in the parent company's foreign-listed shares (Google, Microsoft, Amazon, etc.) as part of their compensation. This creates TWO separate tax events in India (at vesting and at sale) PLUS a mandatory annual disclosure requirement (Schedule FA) that catches many employees off guard, sometimes years after they've forgotten about a small RSU grant.
Tax Event 1: At Vesting — Taxed as a Perquisite (Salary Income)
When RSUs vest (i.e., the restriction lifts and you become the owner of the shares), the Fair Market Value (FMV) of the shares on the vesting date is treated as a perquisite and added to your salary income, taxed at your slab rate — exactly like a cash bonus of the same value.
⚠ Your employer is required to deduct TDS on this perquisite value at vesting, even though you haven't received any cash — you only received shares. Many employers sell a portion of the vested shares automatically ('sell-to-cover') to fund this TDS obligation, which is why you may see fewer shares credited to your brokerage account than the number that technically vested.
Tax Event 2: At Sale — Capital Gains
When you eventually SELL the vested shares, capital gains tax applies on the difference between the sale price and the FMV at vesting (which becomes your cost of acquisition for capital gains purposes, since that's the value already taxed as perquisite/salary).
| Holding Period (from vesting to sale) | Treatment |
|---|
| 24 months or less (foreign unlisted shares typically; for foreign LISTED shares, the holding period for long-term classification may differ — check current rules) | Short-term capital gain, taxed at slab rate |
| More than 24 months | Long-term capital gain, taxed at applicable LTCG rate for foreign shares (typically 20% with indexation, or as per current provisions — foreign shares do NOT get the concessional listed-equity LTCG treatment available to Indian stock exchange-listed shares) |
ExampleAnkit's employer (a US tech company's Indian subsidiary) grants him RSUs that vest over 4 years. In FY 2025-26, 100 shares vest when the FMV is $150/share (₹12,500 at the prevailing exchange rate) — ₹12,50,000 is added to his salary as a perquisite and taxed at his slab rate, with TDS deducted (often via sell-to-cover of some shares). Two years later, Ankit sells these shares when the price is $200/share (₹16,700) — his capital gain is computed as (sale price − ₹12,500 cost basis per share) × 100 shares, converted appropriately, and taxed as a long-term capital gain on foreign shares (since held >24 months from vesting).
Schedule FA: The Often-Forgotten Annual Disclosure
If you are a Resident and Ordinarily Resident (ROR) and hold foreign shares (including unsold/unvested RSUs in some interpretations, and definitely vested shares held in a foreign brokerage account) at ANY POINT during the relevant calendar year, you are required to disclose these in Schedule FA (Foreign Assets) of your ITR — even if:
- You haven't sold any shares
- The value is small
- You've already paid tax on the RSU vesting as a perquisite
⚠ Non-disclosure of foreign assets in Schedule FA can attract penalties under the Black Money Act (₹10 lakh per year of non-disclosure, in addition to regular income tax provisions) — this is a SEPARATE and much more severe consequence than just under-reporting income, and applies even for small-value holdings. Many employees with even a handful of vested RSU shares in a foreign brokerage account are required to file Schedule FA and often don't realize it.
Schedule FA Reporting Period Mismatch
A frequently missed detail: Schedule FA requires reporting based on the foreign calendar year (January to December), not the Indian financial year (April to March) — meaning the reporting period for Schedule FA in your ITR for AY 2026-27 (FY 2025-26, April 2025 to March 2026) would relate to the calendar year ending December 2025, NOT March 2026. This mismatch trips up many first-time filers.
Foreign Dividends on These Shares
Any dividends received on the foreign shares (before or after sale) are taxable as 'Income from Other Sources' in India, with foreign withholding tax on such dividends potentially eligible for Foreign Tax Credit under the relevant DTAA (see our DTAA guide).
Frequently Asked Questions
My RSUs vested two years ago and I already paid tax on them as part of my salary (perquisite). I haven't sold the shares — do I still need to report them every year? ▼
Yes. If you are a 'Resident and Ordinarily Resident' (ROR) and continue to hold these foreign shares (even though tax was already paid on the vesting value as a perquisite in the year of vesting), you are required to disclose them in Schedule FA (Foreign Assets) of your ITR for EVERY subsequent year that you hold them, until you sell them — this is an ongoing annual disclosure requirement, separate from the one-time tax event at vesting. Failing to do this can attract significant penalties under the Black Money Act, regardless of whether any additional tax is actually due.
I sold my vested RSU shares for a loss compared to the price when they vested — can I claim this as a capital loss? ▼
Yes. If the sale price of the shares is LOWER than the FMV at vesting (which is your cost of acquisition for capital gains purposes), the difference is a capital loss — short-term or long-term depending on your holding period from vesting to sale. This loss can generally be set off against other capital gains (subject to the usual set-off rules — short-term losses can be set off against both short-term and long-term gains, while long-term losses can only be set off against long-term gains) and carried forward if not fully utilized, subject to the standard 8-year carry-forward rules for capital losses.
What's the difference between the Indian financial year and the period covered by Schedule FA? ▼
This is one of the most commonly missed details. Your Indian Income Tax Return for Assessment Year 2026-27 covers income for Financial Year 2025-26 (April 2025 to March 2026). However, Schedule FA (Foreign Assets disclosure) within that SAME ITR requires you to report foreign assets held during the CALENDAR YEAR ending on 31 December 2025 — not the financial year ending 31 March 2026. So foreign assets/shares acquired or sold between January and March 2026 would actually need to be reported in the NEXT year's ITR (for AY 2027-28), in the Schedule FA covering calendar year 2026. Getting this period right is essential to avoid both under- and over-reporting.