Definition
RSU Vesting & Tax
Restricted Stock Units are company shares granted to employees that vest over time; in India the value at vesting is taxed as a perquisite, and later sale gains as capital gains.
RSUs are a promise of company shares that vest according to a schedule (for example, over several years). Unlike ESOPs, you typically pay nothing to receive them. When RSUs vest, the market value of the shares on the vesting date is taxed as a perquisite (salary), usually with TDS, and often some shares are sold to cover the tax.
When you later sell the vested shares, any gain over the vesting-date value is a capital gain, classified short- or long-term based on holding period and listing. For foreign-company RSUs (common in MNCs), you also have foreign-asset reporting and currency considerations.
Keep records of vesting-date values and dates, since they form the cost base for capital-gains calculation on sale.
Related terms
- US Stocks from India (LRS)Indian residents can invest in US and other foreign stocks by remitting money abroad under the RBI's Liberalised Remittance Scheme, subject to its annual limit and tax rules.
- ESOP TaxationEmployee Stock Options are taxed in India at two stages: as a perquisite on exercise based on the share value, and as capital gains when the shares are eventually sold.
- ESPPAn Employee Stock Purchase Plan lets employees buy company shares, often at a discount, usually through payroll deductions; the discount is taxed as a perquisite in India.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.