Claim audit · FY 2026-27

“RSUs from a foreign employer are tax-free in India”

TrapFirst spotted trending: YouTube · Audited: 2026-08-11

The condition that decides it

If you are an Indian resident at vesting, the FMV minus the price paid is a salary perquisite under section 17(2)(vi), taxed at slab even if you sell nothing; the later sale is a separate capital gain using that FMV as cost. Only if you are a non-resident at vesting under a foreign employer is the perquisite generally outside Indian tax.

What the department sees

HIGH

Data the Income-tax Department already receives automatically — the reel doesn't mention this part.

The real math

A Bengaluru engineer's US parent company vests 500 RSUs at an FMV of $60 each when she is an Indian resident. The FMV is 500 multiplied by $60, which is $30,000, converted at the SBI TT buying rate of ₹86 per dollar, giving ₹25,80,000. She paid nothing for the shares, so the entire ₹25,80,000 is a salary perquisite under section 17(2)(vi), taxed at her slab rate in the vesting year — even if she sells nothing. Her cost basis for the later sale is that same ₹25,80,000. She later sells 300 shares at $75, receiving $22,500, which is ₹19,35,000; the cost of those 300 shares is 300/500 of ₹25,80,000, equal to ₹15,48,000, so the gain is ₹3,87,000. Because foreign shares follow the unlisted-asset rules, held over 24 months the gain is LTCG at 12.5% with no ₹1.25 lakh exemption. The US employer withholds US tax at vesting, and the foreign tax credit requires Form 67 filed before the ITR due date; a late filing loses it. The 'tax-free' framing ignores the vesting perquisite entirely — the two events are taxed separately.

Questions people actually ask

When is RSU vesting taxed?

At vesting, if you are an Indian resident — the FMV minus what you paid is salary income under section 17(2)(vi), taxed in the vesting year even if no shares are sold.

Is the later RSU sale a separate tax event?

Yes — the sale is a capital gain using the FMV already taxed as cost. Foreign shares follow unlisted-asset rules: 12.5% LTCG after 24 months, with no 112A exemption.

What if I vest while a non-resident?

For RSUs from a foreign employer vested while non-resident, the perquisite is generally outside Indian tax, though the gain on a later sale may still be taxable — check the applicable DTAA.

There's a right way to do this

When do I pay Indian tax on foreign RSUs?

I have RSUs or ESPP from a foreign employer →

Sections: 17(2)(vi), 49, 112A · We audit claims, not creators. Reviewed by Harun Raaj & Associates, Chartered Accountants · All audited claims