Your equity is taxed twice — as salary when it vests, and as capital gains when you sell. Get the order right to avoid double counting, and don't miss the Schedule FA disclosure on foreign shares.
CA Rahul Dang
Founder & Practice Lead
RSUs and ESOPs are among the most mis-taxed components of a salary package, because they are taxed twice — once as salary, once as capital gains — and employees frequently double-count or misreport the gain. Understanding the two tax moments is the whole game.
For an RSU, the tax event is vesting: the fair market value of the shares on the vesting date is a perquisite added to your salary and taxed at your slab rate. For an ESOP, the event is exercise: the difference between the FMV on the exercise date and the price you paid is the perquisite. Your employer usually withholds TDS on this perquisite, often by selling some shares (sell-to-cover). This amount appears in your Form 16 — it is salary, already taxed.
When you later sell the shares, capital gains apply on the difference between the sale price and the FMV already taxed at vesting/exercise (that FMV becomes your cost base). The holding period runs from the vesting/exercise date. This is where double counting happens: employees sometimes pay tax again on the full sale value instead of only the gain over the already-taxed cost. You pay capital-gains tax only on the incremental gain.
For Indian-listed shares, the equity capital-gains rules apply: long-term after 12 months at 12.5% over ₹1.25 lakh, short-term at 20%. For foreign shares (e.g. US-listed RSUs from an MNC), the shares are treated as unlisted/foreign assets: long-term after 24 months, taxed at 12.5%, short-term at slab rates. The holding-period and rate differences between Indian and foreign equity matter a great deal for tech employees.
If you hold foreign shares — including vested-but-unsold US RSUs — you must disclose them in Schedule FA, even if you earned no income and didn't sell. Non-disclosure carries a penalty of up to ₹10 lakh under the Black Money Act. This is the single biggest risk for employees of foreign MNCs, and it is entirely avoidable with correct reporting. If vested foreign stock has already gone unreported for past years, the FAST-DS 2026 scheme is a one-time route to settle it, open until 31 December 2026.
Dividends on foreign shares are taxable in India and often have US tax withheld (typically 25% under the treaty); you can claim a foreign tax credit via Form 67 to avoid double taxation. Keep your broker statements and the 1042-S/withholding proof.
Recognise the two tax moments, use the vesting FMV as your cost base so you don't pay twice, apply the correct holding period for Indian vs foreign shares, and — above all — disclose foreign holdings in Schedule FA. Equity comp is a great wealth builder; clean reporting keeps it that way.
RSUs from a Pune MNC? Don't pay tax twice — or skip Schedule FA. Pune's IT and captive-MNC workforce in Hinjewadi, Kharadi and Magarpatta holds a huge volume of US- and Europe-listed RSUs and ESOPs, and two errors recur every season: paying capital-gains tax on the full sale value instead of the gain over the vesting FMV, and forgetting to disclose vested foreign shares in Schedule FA. At RDA Tax Advisory Services, Baner, we reconstruct each grant — vesting dates, FMV, sell-to-cover TDS in your Form 16 — set the correct cost base, apply the right holding period for Indian vs foreign shares, and complete Schedule FA so you avoid the ₹10 lakh Black Money Act penalty. We also claim your foreign tax credit on US dividend withholding via Form 67. Bring us your equity portal statements and 1042-S before filing: Office No. 102, Snehraj Apartment, Baner, Pune 411045, or call +91 77570 45059. For Pune's MNC employees, getting equity-comp reporting right is the highest-stakes part of the return.
Got RSUs or ESOPs from a Pune MNC? We get the vest-and-sell tax right and complete your Schedule FA correctly. Book an equity-comp review at rdatax.in or call +91 77570 45059 — RDA Tax Advisory Services, Baner, Pune.
Part of the Capital Gains knowledge hub.
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