Taxation of RSUs and how to report them in your income tax return

Several corporates award their top performers with RSUs. RSUs or Restricted Stock Units, as the name suggests are both ‘restricted’ and ‘stocks’ which simply means these come as stocks but with certain restrictions, these may be subject to forfeiture and other conditions regarding vesting as the company may define.

Taxation of RSUs

Tax impact on RSUs arise when these vest. At the time of vesting your gains are not capital in nature and the income earned by you has to be disclosed under other income in your income tax return.

When you sell these vested stocks and have a gain, at this moment your gains are taxed as capital gains.

If the shares are listed on an Indian stock exchange – on sale you may earn a short term capital gain if these are sold within 1 year of vesting or a long term capital gain when sold after more than a year of vesting. Short term gains are taxed at 15% while long term gains are exempt from tax.

If share are listed on a foreign stock exchange – Since no STT is paid, such securities are considered unlisted securites for Indian tax returns. Unlisted securities are considered long term after 36 months. Short term gains shall be added to your total income and long term gains shall be taxed @20% after indexation (calculating gains without indexation is not available in case of equity). For indexing cost pls apply CII of year of purchase for example indexed cost of acquisition = Cost price x CII of 2014-15/CII if year of purchase. Here are all the CIIs you can refer to here.

It’s likely that some tax has already been deducted from your gains in the country where these are listed. In such a case you can take benefit of DTAA between the two countries. You will also have to disclose these as part of foreign income if you are a resident taxpayer in India.

Reporting your Foreign RSUs

Since RSUs are not a capital asset or financial or equity interest until vested these can be reported as part of other assets in schedule FA in your income tax return.

 

When you have incurred a loss

In case you have incurred a loss though you do not have any tax liability, you are allowed to carry forward short term capital losses in your tax return and adjust & set them off against gains in future years.

Disclosures

RSUs must be reported under Details of any other Asset/ Investment outside India. These are reported as “Financial Interest in a Foreign Entity” when your holding is more than 5%.  

If you have any questions, do comment and ask us 🙂

If you need a CA to assist you to e-file, do write to us support@cleartax.in and our CAs will calculate your gains and fill in all your relevant disclosures as well as prepare and e-file your return.

15 Responses to Taxation of RSUs and how to report them in your income tax return

  1. Aditya August 25, 2015 at 12:47 am #

    Cleartax team,
    from article its not clear for the definition of long/short term gains in case of foreign stock exchange. can you explain on that. Also, how does indexation work while calculating tax, would appreciate any reference(s).

    • cleartax-team August 26, 2015 at 9:35 pm #

      Hi Aditya,

      Short term gains shall be when shares are sold within one year of purchase and long term when held for more than one year.

      For indexing cost pls apply CII of year of purchase for example indexed cost of acquisition = Cost price x CII of 2014-15/CII if year of purchase. Here are all the CIIs you can refer to https://cleartax.in/capital-gains/cost-inflation

      If you need a CA to assist you to help calculate your gains and prepare and file your return. Write to support@cleartax.in

  2. Aditi August 25, 2015 at 11:06 am #

    Hi,
    How to calculate capital gain for foreign RSU?

  3. Ameet August 26, 2015 at 3:52 pm #

    hi,

    Thanks for the information on taxation of RSU’s, I have a couple of questions:

    1. Is there an option to calculate LTCG without indexation? What would be the tax rate in that case?
    2. If the shares have been sold at a loss (selling price is lower than the vesting price) do I need to pay any further tax?

    – Ameet

    • cleartax-team August 26, 2015 at 9:40 pm #

      Hi Ameet,

      1. Calculating gains without indexation is not available in case of equity.

      2. In this case you have incurred a loss, though you do not have any tax liability, you are allowed to carry forward short term capital losses in your tax return and adjust & set them off against gains in future years.

      We recommend you opt for our CA assisted plan to help you calculate your gains accurately and our CA can prepare and file your tax return. Write to us support@cleartax.in

  4. Siddharth August 28, 2015 at 7:29 am #

    Thanks for the details above. In my case my organization is US based with office in India. I have received RSUs listed in US. While vesting some of the RSUs are deducted towards Indian tax. I have not sold any of the units hence I guess no capital gains tax is applicable for me. Coud you please suggest if this should be declared under foreign asset and which ITR to be used.

    • cleartax-team August 28, 2015 at 9:34 am #

      Hi Siddharth, yes these are required to be disclosed as foreign assets, you can file ITR-2 or ITR-4 based on your incomes.

  5. Ravi August 28, 2015 at 1:55 pm #

    Hi,

    My org is US based with an office in India. I have stocks vested over the last 10 years and some vesting in the future. I have sold only few of them under loss. So I have declared capital loss for that amount.

    1. Do I need to declare all my vested stock from the past in FA section?
    2. If so, under which head should I declare them? – “Details of any other Capital Assets held” or “Details of Financial interest in Foreign Entity”
    3. Since I only sold a very small part of the stocks vested, how do I offset that while declaring my vested stocks in Schedule FA?

    Thanks for your helpful article!

    • cleartax-team August 29, 2015 at 1:12 pm #

      It is recommended that you disclose all your foreign holdings under schedule FA. If these are already vested you can disclose them as Financial Interest in a Foreign Entity. If not vested these can be included as part of Other Capital Assets. You may need a CA to assist you to make sure you have done all disclosures as required, write to us support@cleartax.in

  6. Kapil August 28, 2015 at 7:40 pm #

    Do I need to declare the brokerage account information also in which RSUs are being deposited by the company. OR declaring only RSUs information will be sufficient

    • cleartax-team August 29, 2015 at 1:10 pm #

      Disclosures is required as per the ‘additional disclosures’ page on ClearTax.in

  7. Shrihari Achayath August 29, 2015 at 11:16 am #

    Where in ITR-2 should I enter my Long Term Capital Gains through the sales of RSUs and ESPP ? The Perquisite tax has been paid for this already, I would like to file the difference in gains and pay tax for it. Can you kindly brief the process.

    In capital gains section I could not find a place to list this as foreign asset. Also is there some indexation which I can apply as some gains are from 2011 time frame.

    • cleartax-team August 29, 2015 at 1:09 pm #

      Do remember to disclose your foreign holdings as part of Schedule FA and do other relevant disclosures. The disclosure with respect to these holdings is available under the additional information page on ClearTax.

      If you need a CA to assist you with this, drop us an email support@cleartax.in

  8. Shishir August 29, 2015 at 12:14 pm #

    Hi,

    If I have received 100 RSUs from my organization (US based, office in India) and when they vested 30 RSUs were automatically sold. Do I need to show 100 RSUs as other Income and value of 30 RSUs as the tax paid on the ‘other income’

    • cleartax-team August 29, 2015 at 1:05 pm #

      Yes, these have to be included as part of your other income, unless your employer included the proceeds in your Form 16. Since these are foreign holdings you may have to also do disclosures in schedule FA and other relevant disclosures. Please drop an email support@cleartax.in if you need a CA to assist you.