RSU Sold but Tax Already Deducted: Reconcile TDS vs Actual Liability at Sale
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.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Short answer: The tax your employer "deducted" at vesting — often by withholding and selling shares (withhold-to-cover) — covers only the perquisite. It does not cover capital-gains tax on the sale. When you sell, you owe tax on (sale price − FMV at vest), using the vest-date FMV as your cost basis (s.49(2AA)). The reconciliation is: pull the vest FMV from your employer/broker, compute the capital gain separately, verify the TDS actually deposited in Form 26AS, and pay the balance through advance tax (if within the year) or self-assessment tax (at filing). The most common error is treating the withheld shares as "zero-cost," which understates the gain — and the tax.
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Why TDS at vest does not settle your sale tax
The withhold-to-cover shares were sold by the employer to fund your perquisite TDS. That settled the salary-leg tax. The moment you sell your remaining shares (or any shares), a fresh capital-gains event arises with no withholding attached.
The four-step reconciliation
- Get the FMV at vest — from your employer, E*TRADE/Schwab statement, or the grant portal. This is your per-share cost basis (₹).
- Compute the capital gain = (sale price in ₹ − vest FMV in ₹) × shares sold.
- Verify TDS in Form 26AS — confirm the perquisite TDS was actually credited to your PAN. If the employer was foreign and deducted nothing, there may be no TDS to claim.
- Pay the balance — capital-gains tax via advance tax (if the sale happens mid-year) or self-assessment tax before filing, plus interest u/s 234B/234C if you delay.
Worked example: Rahul's withhold-to-cover
Persona: Rahul, Indian resident, 100 RSUs vest on 15 September 2025. FMV at vest $40 (₹84/$ → ₹3,360 per share). Employer withholds 35 shares to cover TDS on the perquisite. Rahul receives 65 shares in his account. He sells all 65 on 10 February 2026 at $55 (₹84/$ → ₹4,620 per share).
Step 1 — Perquisite (already taxed):
- Perquisite = 100 × ₹3,360 = ₹3,36,000
- Employer TDS = withheld shares' sale value, credited to Form 26AS. Covered the perquisite tax — done.
Step 2 — Capital gain on sale of 65 shares:
- Sale proceeds = 65 × ₹4,620 = ₹3,00,300
- Cost basis = 65 × ₹3,360 = ₹2,18,400
- Capital gain = ₹81,900
Step 3 — Tax: short-term (sold ~5 months after vest; for foreign-listed shares STCG is at slab rate). At 30% slab: ₹81,900 × 30% ≈ ₹24,570 (before cess).
Step 4 — Pay it: Rahul files ITR-2 (salary + capital gains) and pays the ₹24,570 via self-assessment tax before filing, or as advance tax if the sale occurred early enough in the year. The ₹24,570 is new tax — Form 26AS will not show it, because no one withholds on his own sale.
The error he avoided: some guides tell employees to treat the 35 withheld shares as sold at "zero cost" or to skip the capital gain entirely. Both understate income. The 65 shares he received have a real cost basis (₹2,18,400) that reduces his gain.
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Check the AIS, not just Form 26AS
Form 26AS shows TDS deposited by your employer and your own advance/self-assessment payments. The AIS (Annual Information Statement) goes further — it aggregates the information the tax department has collected about you, including broker-reported share sales, bank interest, and dividend credits. For RSUs:
- Form 26AS — confirms the perquisite TDS under s.192 was credited to your PAN;
- AIS — may show the share-sale consideration reported by your broker or the depository, which is your capital-gain trigger.
Reconcile both before filing. If the AIS shows a sale your draft return omits, the mismatch invites a s.143(1) intimation or a scrutiny query.
If you delay, interest piles on
The capital-gains tax on your RSU sale is not withheld by anyone. If you neither pay advance tax during the year nor self-assessment tax before filing, the unpaid tax attracts:
- s.234B — 1% per month from 1 April of the assessment year if total prepaid tax is below 90% of assessed tax;
- s.234C — 1% per month on missed instalment shortfalls;
- Interest under s.234A for the delay between the due date and the actual filing.
None of these are penalties — they are compensation for keeping the government's money late. Pay the balance before filing and the interest stays at zero.
Frequently Asked Questions
1. My employer withheld shares for TDS at vest. Is my tax fully paid?
No. The withheld shares covered only the perquisite TDS. The capital-gains tax on the shares you sell is separate and unpaid until you pay it.
2. What is my cost basis for the shares I receive after withhold-to-cover?
The FMV at vest per share (s.49(2AA)) multiplied by the number of shares you actually hold. The withheld shares do not change your per-share cost basis.
3. How do I check the TDS the employer deposited?
Download Form 26AS (and the AIS) from the e-filing portal. The perquisite TDS appears as a s.192 deduction against your PAN. If it does not appear, follow up with payroll.
4. I sold my RSUs and owe capital-gains tax. How do I pay?
If the sale was within the financial year, pay advance tax by the relevant instalment (15 June / 15 Sep / 15 Dec / 15 Mar). If the year has ended, pay self-assessment tax before filing the ITR.
5. What happens if I ignore the capital gain on RSUs I sold?
The capital-gain income shows up in your AIS (broker/bank reporting). Ignoring it invites an intimation under s.143(1) or scrutiny, with interest and possible penalty on the unpaid tax.
6. My employer is a foreign company and deducted no TDS. What now?
If no Indian TDS was deducted, there is nothing in Form 26AS for the perquisite. Declare the perquisite as salary income in the ITR, compute the tax yourself, and pay via advance/self-assessment. If the US withheld tax, claim a credit via Form 67 / Schedule TR.
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Reconcile before you file
Run your vest and sale through the ESOP Tax Calculator to confirm the perquisite, the cost basis, the capital gain, and the tax still owed — then reconcile the TDS shown in Form 26AS before filing.
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Last verified: 2026-08-08.
Sources: Sections 17(2)(vi), 45, 48, 49(2AA), 192, 234B, 234C ITA 1961; Form 26AS / AIS on the income-tax e-filing portal.
Reviewer: pending CA sign-off. Draft status — do not publish before CA review.
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